April 8, 2022

Weekly Market Commentary April 4th to April 8th 2022

Factory orders for U.S.- made goods led off a light week of economic data releases and declined less than forecast at -0.5% in February, while the prior month was revised up slightly to 1.6%. Excluding transportation Factory orders increased by 0.4%, slightly ahead of the estimate, but down from the previous month’s rate of 1.2%. A switch to services spending and shortages of materials were noted as headwinds

The Institute for Supply Management released its services data on Tuesday registering a robust reading of 58.3, slightly below the estimate but above the prior month’s print of 56.5. Respondents continue to note supply chain challenges and labor and inflation pressures.

The most anticipated data release for the week was the Federal Reserve’s meeting minutes on Wednesday as investors look for more details on the plan to unwind its balance sheet and curb inflation. The biggest takeaway was the plan to allow up to $95B to roll off from the portfolio per month. The minutes also showed that many officials favored a 50bps rate increase in March, which opens the door for potentially higher rate increases moving forward.

The S&P 500 opened on Monday with a modest gain, driven by technology companies that have been beaten up so far in 2022. However, markets gave up the gains mid-week in anticipation of the Federal Reserve’s minutes and never regained lost ground. Overall, the S&P closed the week at 4,488, lower by -1.3%.

Volatility in interest rates continued with the yield on the 10-Year U.S. Treasury opening the week at 2.39% and increasing to 2.71% after the Federal Reserves minutes detailed a more aggressive balance sheet reduction. The increase in the long end of the yield curve reversed a temporary inversion when short-term rates exceeded long-term rates earlier in the week.

Key economic releases next week include CPI & PPI inflation, Retail Sales, and several sentiment indexes.

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