May 19, 2023

Weekly Market Commentary May 15th to May 19th 2023

Retail sales saw a modest rebound in April, with headline retail sales increasing 0.4% versus a 0.7% decline in the prior month. Although the headline number missed the 0.8% estimate, the gain in sales excluding autos and gasoline topped expectations. The report suggests low unemployment and steady wage growth continue to support demand for merchandise.

Empire State factory gauge plunged to -31.8, the biggest drop in New York state manufacturing activity since April 2020 as orders and shipments shrank abruptly. Prices paid rose, prices received fell, and 49% of survey respondents reported worsening conditions.

MBA mortgage applications fell 5.7% after rising 6.3% the week prior. Purchases were down 4.8% and refis down 7.7%. Borrowing costs hit a two-month high as the average 30-year fixed mortgage rose 9bps to 6.57%, underscoring how affordability concerns continue to pose problems in the sector.

Initial jobless claims came in below expectations at 242,000, much lower than the 264,000 in the prior week. The dramatic drop is being attributed to fraudulent claims that were inflating prior readings during the month of May.

US housing starts rose 2.2% as single-family homebuilding increased 1.6% to the highest level this year. Starts of apartment buildings and other multifamily projects also rose. Meanwhile, existing home sales decreased in April by 3.4% to a 4.28 million annualized pace, the slowest in three months. Although it declined, the results were in line with expectations.

Equity markets saw a strong rally driven mostly by big tech names such as Nvidia, Google, Meta, and Amazon. As a result, the Nasdaq had the biggest weekly gain of 3.0%, closing at 12,656. Conversely, the Dow Jones only had a modest gain of 0.4% closing at 33,426. The S&P 500 rose 1.6% to 4,192, hitting new highs for the year. Treasury yields also saw a large gain, with the 2-Year Treasury rising 30bps to 4.29% and the 10-Year rising 23bps to 3.70%.

Next week we will see manufacturing and services PMI, GDP readings, and Personal Consumption Expenditures.

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