Weekly Market Commentary May 16th to May 20th 2022
A light but telling week of economic releases was pushed to the background by the pummeling of equity markets. Skittish investors seemed to be getting more and more spooked by lukewarm data as signs are becoming clear that the economy is slowing. Starting with the consumer, hard measures such as Retail Sales, while beating April’s estimates, came in well below March’s figures. And softer measures such as Consumer Confidence, have also revealed the concern that average folks have with the direction and strength of the US economy.
Moving on to manufacturing and also supporting the evidence of a weakening economy, two regional measures of manufacturing produced big surprises to the downside. On Monday, the Empire State Manufacturing Index for April came in at -11.6 when consensus called for 16.3 and March was at 24.6. On Thursday, the Philadelphia Fed Manufacturing Index came in at 2.6 when economists were looking for 15.0 after March’s 17.6. Both indices can be volatile so let’s see if a trend is developing here.
In the real estate sector, Housing Starts and Building Permits for April both came in as expected. Starts were slightly higher than in March while Permits where down from the previous month. Look for rising mortgage rates and consumer edginess to possibly put a real dent in the red-hot housing market.
Lastly, Initial Jobless Claims, the best barometer for recent employee layoffs, moved off its recent historic lows and came in at 200,000 which bested consensus by 18,000.
Now about those markets. Equities sustained their longest weekly losing streak since 2001. The S&P 500 finished the week at 3901 or down 3.0%. The Dow Jones Industrials Average closed out the week at 31,260, also off 3.0%. Finally, and continuing to take on the most water, was the NASDAQ which dropped 3.8% this week to close at 11,355. Bad feelings regarding inflation, increasing interest rates, prolonged overseas shutdowns due to Covid-19, the continuing war in Ukraine, changing consumer sentiment, and concern about near-term corporate profits all had a hand in this week’s market sell off.
There was a bit of a rally in the fixed income markets as US Treasury yields dropped across the board. The 2-Year ended at 2.59%, the 10-Year at 2.79%, and the 30-Year finished at 2.99%.
Next week, look for the S&P Global US Manufacturing and Services PMIs, New and Pending Home Sales, Durable Goods and Capital Equipment Orders, PCE inflation data, Consumer Spending and Personal Income, and the University of Michigan consumer confidence survey results.