Weekly Market Commentary March 6th to March 10th 2023

After a hawkish testimony from Fed Chair Jerome Powell on Tuesday, investors were hoping for Friday’s labor report to be cooler than expected in hopes that the Fed will be less aggressive with rate hikes. Jobs ended up being strong, with non-farm payrolls increasing 311,000 versus a 225,000 expectation, and private jobs increasing 265,000 versus a 216,000 expectation. However, unemployment ticked higher to 3.6%, above the 3.4% forecast, and hourly earnings came in less than expected, with a monthly increase of 0.2% (0.4% expected) and a yearly increase of 4.6% (4.7% expected). As a result of a mixed report, the markets did not immediately react dramatically one way or another and opened flat for the trading session.

The JOLTS reading on Wednesday showed the number of available jobs decreased to 10.8 million in January from an upwardly revised 11.2 million a month earlier. The survey called for 10.5 million, resulting in the fifth straight month of a higher-than-expected JOLTS reading. The report highlights persistent labor tightness.

Consumer credit rose in January by $14.8 billion, much lower than the expected $25 billion. Non-revolving credit, such as loans for vehicles and education, rose by $3.6 billion, the smallest gain since August 2020. Revolving credit, such as credit cards, increased $11.2 billion.
The MBA mortgage applications index rose 7.4% last week after falling 5.9% the week prior, the first increase since February 3rd. Purchases were up 6.6%, Refis were up 9.4%, and the average 30-year fixed rate was 6.79%. Initial jobless claims of 211,000 was higher than expected but in line with the 12-month average.

The equity markets had their worst week since the Fall of 2022 when the bear market bottom was established. Regional banks were key detractors after Silicon Valley Bank was placed into receivership on Friday. The S&P 500 fell 4.55% and closed at 3,862. The Nasdaq fell 4.68% and closed at 11,139. The Dow Jones Industrial Average fell 4.44% and closed at 31,910. U.S. Treasury yields also fell on the week, with the 10-year Treasury falling 27bps to 3.69%. Although the 2-year suffered a similar fall of 28bps to 4.58%, it’s worth noting it cracked 5% earlier in the week, the first time since 2007.

Next week will contain significant market data as we get CPI inflation data on Tuesday, and PPI inflation and Retail Sales on Wednesday.