08|30|2022

All Alone… | August 26, 2022

AUTHOR: Jason Roque, CFP®, APMA®, AWMA®
TITLE:   Investment Adviser Rep – CCO
TAGS: S&P 500, NASDAQ, CPI, PPI, Oil, Retail Sales, Sentiment
  

Markets lost ground for the second week. Does this say more about the last two weeks or the week ahead?

Monday                       S&P 500 0.11% | NASDAQ 0.41%

Markets opened the week in a muted tone. There was very little movement as Consumer Price Index (CPI) data was awaited on Tuesday.

Tuesday                        S&P 500 1.12% | NASDAQ 1.54%

CPI data for February showed inflation inching up slightly. Markets opened in the red on the news, but an earnings beat by Oracle allowed equities to march higher.

Wednesday                 S&P 500 0.19% | NASDAQ 0.54%

Crude oil inventories fell when a surplus was expected, which will further support higher prices for energy. Interest rates climbed on the back of the higher than expected CPI data from Tuesday. Growth stocks lagged as the data implies the Federal Reserve Board (FRB) will be less likely to cut rates.

Thursday                     S&P 500 0.29% | NASDAQ 0.30%

The Producer Price Index (PPI), a wholesale inflation gauge, rose in February to 1.6%. Retail sales advanced less than expected and initial jobless claims remained benign. A strong jobs market with firming inflation does not bode well for future rate cuts. Markets sold on the news, though not aggressively, as hope remains for FRB rate cuts later in the year.

Friday                          S&P 500 0.65% | NASDAQ 0.96%

Consumer sentiment is projected to fall to 76.5 in March from 76.9 in February. While lower, February and March are the first readings in the 70’s since August of last year. The week closed out on a sour note as commodity prices rise with inflation data. Further concerns mount that the inflation fight may have longer to go before a rate cut.

Conclusion                  S&P 500 0.13% | NASDAQ 0.70%

This is the first back-to-back losing weeks for the market in 2024. This leads to an FRB meeting week where guidance about potential future rate cuts will be hotly watched. Not only is the FRB meeting next week, but there is very little in the way of economic data for the week. This puts all the more focus on the FRB. 

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Markets were slayed this last week. Everyone is feeling the pain, but why are we actually all alone?

Monday   S&P 500 2.14% | NASDAQ 2.55%

As is often the case, markets opened the week as they had ended the prior week. Equities sold hard as the reality of a more aggressive Federal Reserve Bank (FRB) than recently expected becomes more obvious. The CBOE VIX (Measure of volatility) rose to 23.84, just above its long-term average.

Tuesday   S&P 500 0.22% | NASDAQ 0.00%

Markets appeared flat on the day, however tech and consumer stocks performed well. Meanwhile, the rest of the market was soft.

Wednesday   S&P 500 0.29% | NASDAQ 0.41%

Wednesday marked six months since Russia invaded Ukraine. Markets increased marginally on the day. Technology stocks led, which signals a more dovish expectation for the FRB. That will be made clearer after Friday’s Jackson Hole speech.

Thursday   S&P 500 1.41% | NASDAQ 1.67%

Markets were in the green from go as GDP was revised up to -0.6%. Additionally, Core Personal Consumption Expenditures (PCE) are projected to fall to 4.4% from 4.8% tomorrow. PCE is the FRB’s preferred measure of inflation. The weaker inflation expectations with a better preforming economy provided a bump to equities on the day.

Friday   S&P 500 3.37% | NASDAQ 3.94%

Core PCE fell to 4.6% and headline PCE fell to 6.3% (from 6.8%). Additionally, future inflation expectations have come down and consumer sentiment rose! However, markets did not rise. The FRB speech in Jackson Hole delivered a message that in fact rocked markets. They essentially said that rates will have to hold at a higher level for a longer period of time.

Conclusion   S&P 500 4.04% | NASDAQ 4.44%

The FRB message indicates that a recession may not bring them to cut rates. Unemployment will have to rise meaningfully for them to feel that inflation will not resurge. A ‘meaningful’ rise in unemployment would likely be an amount that would occur well into a recession. At some point after that they will likely have to cut rates and restimulate the economy… Ultimately what this tells us is that we are on our own folks!

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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.