March 31, 2023

Weekly Market Commentary March 27th to March 31st 2023

The Dallas Fed Manufacturing Index kicked off the week of data, declining by -15.7, worse than the estimate and below the prior month’s reading of -13.5. The Richmond Fed Manufacturing Index reported results later in the week and a similar negative print of -5, but better than the estimate and prior month’s decline of -16. Both show continued weakness in the sector.

Housing data was released midweek in the form of MBA mortgage applications, which increased by 2.9%, as the average mortgage rate declined to 6.45%. The decline in rates also led to an increase in pending home sales in February, increasing by 0.8% but remain 21.1% below year ago levels.

The third and final reading of 4Q22 Gross Domestic Product (GDP) was revised lower to 2.6% as personal consumption fell to 1.0% from 1.4% and contributed to most of the revision.

Friday had the most awaited data and leading off was personal consumption which increased by 0.2% in February, less than the estimate of 0.3% while personal income rose by 0.3%, above the 0.2% estimate. Year-over-year, consumer spending has increased by 7.6%, while personal income rose by only 6.2%.

Personal Consumption Expenditures (PCE) rounded out the week’s data and showed improvement from January with the core deflator increasing by 0.3% month-over-month, better than the 0.4% estimate and the prior month’s increase of 0.6%. The PCE core deflator came in at the estimate of 0.3% and below the January print of 0.6%. Despite a monthly deceleration from January levels, the year-over-year level for core PCE is 4.6% and well-above the long-term target of 2%.

The S&P 500 continued its positive momentum from the prior week, opening the week at 3,970, closing at 4,109 and up 3.5%.

Treasury yields bounced off YTD lows and continued to increase throughout the week, with the 2-year opening the week at 3.77% and closing at 4.05% as fears of additional bank contagion abated. The longer dated 10-year note increased from 3.38% to 3.48%, increasing the curve’s inversion to -57bps, from -39bps.

Economic releases next week include the ISM Manufacturing and Services Indexes, and the always highly anticipated March payrolls report.

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