Weekly Market Commentary March 7th to March 11th 2022
February’s Consumer Price Index rose 7.9% from a year ago, the highest since 1982. During the height of the pandemic many economists, including the members of the Federal Reserve expected inflation to be a transitory phenomenon caused by the effects of the COVID-19 pandemic. However, inflation has gained momentum in the first months of 2022 as oil prices have skyrocketed due to severe sanction against Russia. Earlier this week, consumers saw the highest price of gas on record at $4.17 a gallon while the gasoline index rose 6.6% in February. This accounted for nearly a third of the increase while shelter and food prices were also large contributors.
Other economic news for the week included Initial Jobless Claims and the University of Michigan Consumer Sentiment Survey. Initial Jobless Claims ticked up slightly to 227k from 215K last week but has had less of an impact on financial markets more recently as the unemployment picture has become clearer. The University of Michigan Consumer Sentiment Survey released this morning provided the first glimpse into consumer’s reaction to the Russian invasion. The gauge fell to 59.7 from 62.8 a month ago, the lowest reading since 2011.
All of the companies in the S&P 500 have reported 2021 earnings, and the results were fantastic. The index reported earnings growth of 48% on 17% revenue growth. Looking forward, we expect mid-single digit earnings growth against tough comps in the first quarter.
The S&P 500 and Nasdaq indices suffered their second week of declines while the Dow fell for the 5th consecutive week as markets have reacted to an anticipated rate hike and concern about the war in Ukraine. For the week, the Dow fell -2.0%, while the S&P fell -2.8% and the Nasdaq was off by -3.5%. In fixed income markets, the yield curve experienced a parallel shift higher with both the 2 and 10-year Treasuries up by 0.26%, finishing at 1.74% and 2.0% respectively.
Next week’s economic releases include Retail Sales, Producer Price Index, Housing Starts and Permits, and the Federal Reserve rate decision.