Market Update for March 13th
- Report releases: The economy and labor market show signs of persistent strength
2. Financial market data: Bonds rallied as equities sold off amid banking concerns
3. Looking ahead: Inflation reports will provide insight after a volatile week in bonds
Keep reading for an in-depth look.Report Releases—March 6–10, 2023
Consumer Credit, January (Tuesday)
Consumer credit rose to $14.80B, up from $11.57B in December. The pickup in credit bucked the large drop of roughly $16.4B in December. The drop is common as the holiday shopping season started earlier, but the trend is worth watching.
International Trade Report, January (Wednesday)
The trade deficit widened less than expected in January. Imports fell 3 percent while exports rose for the first time since August.
- Expected/prior trade deficit: –$68.7 billion/–$67.2 billion
- Actual trade deficit: –$68.3 billion
JOLTS Job Openings, January (Wednesday)
The Job Openings and Labor Turnover Survey (JOLTS) report for January showed job openings fell to 10.8 million (down 410,000). The rate of quits decreased to 3.9 million while the number of layoffs and discharges increased to 1.7 million. The report showed signs that the labor market is softening.
Employment Report, February (Friday)
Overall, the labor market remained strong in February, as shown by the 311,000 jobs that were added. Despite faster-than-expected hiring, average wage growth increased less than expected.
- Expected/prior monthly job growth: 225,000/504,000
- Actual monthly job growth: 311,000
- Expected/prior unemployment rate: 3.4%/3.4%
- Actual unemployment rate: 3.6%
- Consumer credit and international trade recovery indicated continued strength for the economy.
- The labor market remains tight. The JOLTS and employment reports showed higher-than-expected job growth in February following a decline in job openings in January.
Financial Market Data
|MSCI Emerging Markets||–3.28%||–0.86%||0.04%||–10.54%|
Source: Bloomberg, as of March 10, 2023
Equities sold off last week amid large swings in Federal Reserve (Fed) policy expectations and added volatility from the closure of Silvergate Capital (SI) and Silicon Valley Bank (SIVB). Silvergate was a popular bank for housing assets of many crypto exchanges but faltered as its fixed income assets lost value following the rapid increase in Fed hikes. Silicon Valley Bank was a bank of choice for many venture capital firms and individuals. On Friday, the stock was halted as it announced it failed to find a buyer to raise the capital it needed to offset liabilities and fixed income losses.
|U.S. Broad Market||1.04%||1.45%||–7.35%|
Source: Bloomberg, as of March 10, 2023
U.S. Treasury yields fell sharply as investors flocked to fixed income amid the equity volatility. The 2-year, 5-year, 10-year, and 30-year fell 27 basis points (bps) (to 4.59 percent), 28 bps (to 3.97 percent), 26 bps (to 3.7 percent), and 17 bps (to 3.71 percent), respectively. Future rate expectations were whipsawed last week amid the volatility. Inflationary data is due out this week and will play into the Fed’s difficult decision ahead as it tries to balance volatility in the face of persistently high inflation.
- The Russell 2000, which hosts many regional banks, led the way for losses.
- Both treasuries and equities were highly volatile as implications of the two bank collapses remain uncertain.
There will be many data releases that focus on a variety of topics, including inflation, the consumer, and housing.
- Tuesday will see the release of the Consumer Price Index for February. Headline consumer prices are set to rise. On a year-over-year basis, consumer inflation is expected to slow. A higher-than-expected report will put the FOMC in a hard place in deciding near-term rate policy amidst a volatile market and high inflation.
- Wednesday’s reports will include the Producer Price Index and retail sales. Headline and core producer inflation are set to slow in February, with falling energy prices expected to help ease producer price pressure.
- Finally, the housing starts and building permits reports for February will be published on Thursday. Housing starts and building permits are set to increase modestly in February; however, despite the anticipated increase, both measures of new home construction are expected to remain near multi-year lows.
Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.
Authored by the Investment Research team at Commonwealth Financial Network.
Kris Maksimovich is a financial advisor located at Global Wealth Advisors 4400 State Hwy 121, Ste. 200, Lewisville, TX 75056. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Financial planning services offered through Global Wealth Advisors are separate and unrelated to Commonwealth. He can be reached at (972) 930-1238 or at firstname.lastname@example.org.
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