Weekly Market Commentary January 23rd to January 27th 2023
A busy week of mixed economic data started with the S&P Global Manufacturing and Services Indices. Both retracted (as predicted) and hinted at the slowing overall pace of the economy.
Next up was the first cut of Q4-2022 GDP and it was a surprise to the upside. Consensus called for +2.6% but strength in inventories and consumer spending pushed the actual result to +2.9%. Look for this figure to fall going into 2023 as the Fed pushes interest rates higher to rein in inflation.
Another surprise to the upside (or downside, depending on your perspective) was the Weekly Initial Jobless Claims. Under more normal times, seeing a print below 200k would be welcome news. But all this week’s 186k figure will do is continue to strengthen the Fed’s resolve that the employment situation is strong enough to handle more tightening. As mentioned here before, this will be a key indicator going forward as to the Fed’s interest rate decisions.
Next up we had Durable Goods Orders for December, and this was a big beat. Consensus called for +2.5% and the actual figure came in at +5.6%, owing in part to strong results from the volatile defense and transportation sectors. November was also revised from -2.1% to -1.7%. Stripping out transportation, and the results were slightly down for the month.
Personal Income was up (employment strength?) while Personal Spending was slightly down (recession-wary consumers?) in a mixed release of consumer data. Personal Consumption Expenditures, which is tied directly to inflation, followed recent promising consumer and producer prices downward from 5.5% to 5.0% year-over-year. As with the CPI and PPI, this trend must continue in order for the Fed to consider altering their course.
Lastly, in the real estate market, New Home Sales and Pending Home Sales were up 2.3% and 2.5% respectively for December, helped by builder incentives and declining mortgage rates. However, 2022 New Home Sales were down 16.4% from 2021 in this once red-hot sector.
The stock market had another strong week with the S&P 500 finishing at 4,070, up 2.5%. The Dow Jones Industrials followed suit and finished up 1.8%; while the tech-heavy NASDAQ ended the week up 4.3%. Yields were mixed across the curve but basically flat on the week. The bellwether 10-year US Treasury was up slightly and ended the week at 3.52%.
Key economic releases next week include the FOMC’s rate decision, the January Jobs Report, the ISM Manufacturing and Services Indices, and Weekly Initial Jobless Claims.