March 4, 2023

Weekly Market Commentary February 27th to March 3rd 2023

Starting the week, January’s preliminary Durable Goods Orders level came in at -4.5%, 0.5% worse than the -4.0% forecast. Drilling down into the numbers shows that the cause is the result of a decline in civilian aircraft. Capital Goods Orders Nondefense Ex Aircraft was up 1.1% for the month and the highest level since August.

The Institute for Supply Management (ISM) Manufacturing number for February was expected to be 48.0 but was lower at 47.7 and the only increase since August. Obviously, either of these outcomes are below expansionary territory of 50 or greater. The largest component movers were Backlog of Orders at 45.1 from 43.4, New Orders at 47.0 from 42.5, and Prices Paid at 51.3 from 44.5 primarily due to fuel prices. Not a large mover but Supplier Delivery Times at 45.2 from 45.6 offers a bit of optimism that supply constraints are decreasing.

The ISM Services number for February came in at 55.1; better than the 54.4 forecast but slightly lower than the previous month’s 55.2 reading. The main component movers were Production at 60.4 to 56.3, Employment at 50.0 to 54.0, New Orders at 60.4 to 62.6, and Prices Paid at 67.8 to 65.6. Supplier Delivery Times at 50.0 to 47.6 for ISM Services also suggests decreasing supply constraints. The drop in ISM Manufacturing and ISM Services remaining at expansionary levels suggests a consumer shift from goods to services.

U.S. equities were up for the week. The S&P 500 was up 1.91% finishing the week at 4,046, while the Nasdaq increased 2.58% to 11,689 and the Dow Jones Industrials down 1.75% at 33,391. The 10-year essentially remained flat at 3.96% this week from 3.95% last week.

Key economic releases next week include Factory Orders, the final revision to January’s Durable Goods Orders, Change in Nonfarm Payrolls, and the Unemployment Rate, among others.

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