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Weekly Market Insights

The Markets (as of market close May 13, 2022)

Despite a late-week rally, stocks closed last week lower, extending the market's streak of losses to six consecutive weeks. In what proved to be a very choppy week of trading, each of the benchmark indexes lost value, led by the Nasdaq, which is down over 24.0% so far this year. The large caps of the Dow and the S&P 500 are down 11.4% and 15.6%, respectively, in 2022. On the other hand, 10-year Treasury yields have risen over 140 basis points so far this year. Last week, crude oil prices ended relatively flat, while the dollar advanced marginally. Gold prices slid lower. Investors are still grappling with the economic impact of the Federal Reserve's response to persistent inflation. In a sign that inflation is still running hot, two major inflation reports, the Producer Price Index and the Consumer Price Index (see below) showed annual increases of 11.0% and 8.3% through April.

Last Monday saw the S&P 500 dip 3.2% to fall below 4,000 for the first time since March 2021. Investors moved away from stocks, uncertain of how aggressive the Federal Reserve will be to slow rising inflation. The Nasdaq fell 4.3% to its lowest level since November 2020. The Russell 2000 dropped 4.2%, and the Dow declined more than 650 points, or 2.0%. Ten-year Treasury yields slipped 4.4 basis points, but remained over 3.00%, closing the day at 3.07%. The dollar was flat. Crude oil prices fell $7.30 to $102.47 per barrel.

Stocks ended last Tuesday slightly higher in a day of choppy trading. The Nasdaq gained 1.0% and the S&P 500 rose 0.3%. The Dow inched up less than 0.1%, the Global Dow gained 0.1%, while the Russell 2000 lost 0.3%. Ten-year Treasury yields fell for the second consecutive day, sliding more than 10 basis points to 2.97%. Crude oil prices also dipped below $100.00, to close the day at around $99.87 per barrel. The dollar increased, while gold prices fell.

Wall Street saw stocks retreat last Wednesday, with each of the benchmark indexes listed here ending the day in the red. A drop in the Consumer Price Index (see below) wasn't enough to temper investor concerns about rising inflation. Once again, the Nasdaq led the declines, dropping 3.2%, followed by the Russell 2000 (-2.5%), the S&P 500 (-1.7%), the Dow (-1.0%), and the Global Dow (-0.1%). Crude oil prices vaulted higher, jumping nearly $5.50 to reach $105.25 per barrel. The dollar and gold prices advanced, while 10-year Treasury yields fell to 2.92%.

Last Thursday was another day of extreme volatility in the market. Ultimately, the Nasdaq eked out a 0.1% gain, the Russell 2000 rose 1.2%, while the Dow (-0.3%) and the S&P 500 (-0.1%) dipped lower. Ten-year Treasury yields fell 10.4 basis points to 2.81% as bond prices climbed higher. Crude oil prices jumped for the second consecutive day, closing at $106.73 per barrel. The dollar also advanced, while gold prices fell.

In what may prove to be a robust day of dip buying, stocks rebounded last Friday. Each of the benchmark indexes listed here posted solid gains, led by the Nasdaq (3.8%) and the Russell 2000 (3.3%). The S&P 500 advanced 2.4%, the Global Dow rose 1.6%, and the Dow gained 1.5%. As equity values rose, so did bond yields, reversing a rally in bond prices. Ten-year Treasury yields added 11.8 basis points to reach 2.93%. Crude oil prices advanced over $4.00 to hit $110.30 per barrel. The dollar slid lower for the first time all week.


Market/Index

2021 Close

Prior Week

As of 5/13

Weekly Change

YTD Change

DJIA

36,338.30
32,899.37 32,196.00 -2.14% -11.40%

Nasdaq

15,644.97

12,144.66 11,805.00 -2.80%

-24.54%

S&P 500

4,766.18

4,123.34 4,023.89 -2.41% -15.57%

Russell 2000

 2,245.31 1,839.56

1,792.67

-2.55% -20.16%

Global Dow

4,137.63

3,805.92

3,743.16 -1.65%

 

-9.53%

Fed. Funds target rate

0.00%-0.25%

0.75%-1.00%

0.75%-1.00%

0 bps

75 bps

10-year Treasuries

1.51%

3.12%

2.93%

-19 bps 142 bps

US Dollar-DXY

95.64

103.67

104.56

0.86% 9.33%

Crude Oil-CL=F

$75.44 $110.56 $110.46 -0.09% 46.42%

Gold-GC=F

$1,830.30

$1,882.10 $1,806.90 -4.00%

 

-1.28%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week's Economic News

  • Inflation decelerated in April, according to the Consumer Price Index. The CPI rose 0.3% last month after advancing 1.2% in March. The year-over-year rate lowered from 8.5% in March to 8.3% in April. However, the CPI, excluding food and energy prices, rose 0.3 percentage point to 0.6% in April. Helping to pull the April CPI lower was a 2.7% drop in energy prices after increasing 11.0% in March. On the other hand, food prices rose 0.9% in April and have increased 9.4% over the last 12 months, the largest year-over-year increase since April 1981. Also, contributing to the April rise in the CPI were increases in prices for shelter, airline fares, new vehicles, medical care, recreation, and household furnishings and operations. Whether the April data is a sign of slowing inflation remains to be seen. It is unlikely to have an immediate impact on the fiscal tightening policy of the Federal Reserve.
  • The Producer Price Index for April rose 0.5% after advancing 1.6% in March. Producer prices have increased 11.0% since April 2021. Energy and food prices increased last month and have risen 40.0% and 16.3%, respectively, over the past 12 months. Also marking a notable increase in April were prices for construction, which climbed 4.0%. Prices less foods, energy, and trade services moved up 0.6% in April after increasing 0.9% in March. For the 12 months ended in April, the index less foods, energy, and trade services rose 6.9%.
  • In a sign that inflationary pressures may have peaked, April import prices were unchanged from a month earlier. Import prices are up 12.0% since April 2021. Fuel import prices declined 2.4% in April following a 17.3% increase the previous month, the first one-month drop since December 2021. Despite the decrease in April, import fuel prices rose 64.3% over the past 12 months. Nonfuel import prices increased 0.4% in April. Higher prices for nonfuel industrial supplies and materials, capital goods, foods, feeds, and beverages, and automotive vehicles all contributed to the April increase in nonfuel import prices. Nonfuel imports rose 7.2% over the past 12 months. Export prices advanced 0.6% last month after climbing 4.1% in March. Agricultural exports advanced 1.1% in April, after increasing 4.3% the previous month. Nonagricultural exports advanced 0.5% in April following an increase of 4.1% in March.
  • The federal budget in April posted a $308.2 billion surplus, compared to a $225.6 billion deficit a year ago. Government receipts totaled $863.6 billion, or $548.4 billion more than March receipts and 97.0% above the total from April of last year. Government expenditures were $555.4 billion, or $47.6 billion more than March outlays. Through the first seven months of the fiscal year, the government budget deficit sits at $360.0 billion, 81.0% lower than the $1,931.8 billion shortfall over the same period last year. Contributing to the increase in government receipts this fiscal year is a 69.0% increase in individual income tax receipts. Also, employment and general retirement tax receipts are up 7.0% and corporate income taxes increased 22.0%.
  • The national average retail price for regular gasoline was $4.328 per gallon on May 9, $0.146 per gallon above the prior week's price and $1.367 higher than a year ago. Also as of May 9, the East Coast price increased $0.15 to $4.24 per gallon; the Gulf Coast price rose $0.15 to $4.01 per gallon; the Midwest price climbed $0.17 to $4.15 per gallon; the West Coast price increased $0.12 to $5.22 per gallon; and the Rocky Mountain price increased $0.04 to $4.23 per gallon. Residential heating oil prices averaged $3.95 per gallon on May 6, about $0.83 per gallon less than the prior week's price. U.S. crude oil refinery inputs averaged 15.7 million barrels per day during the week ended May 6, which was 230,000 barrels per day more than the previous week's average. During the week ended May 6, refineries operated at 90.0% of their operable capacity, and gasoline production increased, averaging 9.7 million barrels per day.
  • For the week ended May 7, there were 203,000 new claims for unemployment insurance, an increase of 1,000 from the previous week's level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended April 30 was 1.0%, unchanged from the previous week's rate. The advance number of those receiving unemployment insurance benefits during the week ended April 30 was 1,343,000, a decrease of 44,000 from the previous week's level, which was revised up by 3,000. This is the lowest level for insured unemployment since January 3, 1970, when it was 1,332,000. States and territories with the highest insured unemployment rates for the week ended April 23 were California (2.1%), New Jersey (2.1%), Alaska (1.9%), Rhode Island (1.8%), New York (1.7%), Puerto Rico (1.6%), Massachusetts (1.5%), Minnesota (1.5%), Pennsylvania (1.4%), Connecticut (1.3%), and Illinois (1.3%). The largest increases in initial claims for the week ended April 30 were in New York (+7,329), Illinois (+3,140), Kentucky (+1,152), Michigan (+1,092), and New Hampshire (+469), while the largest decreases were in Massachusetts (-3,029), California (-2,816), New Jersey (-2,466), Connecticut (-2,319), and Ohio (-2,018).

Eye on the Week Ahead

The April figures for existing home sales are out this week. The housing sector has slowed from last year's torrid pace. Sales of existing homes have declined in both February and March. An indicator of consumer spending, the retail sales report for April is available this week. March saw retail sales advance 0.5%, bringing the year-over-year increase to 5.5%. Also out this week is the Federal Reserve's monthly index of industrial production for April. Industrial production advanced 0.9% in March and is up 5.5% from March 2021.

 

The Markets (as of market close May 6, 2022)

Stocks ended last week lower, marking the fifth consecutive week of losses. Despite suggestions from Federal Reserve Chair Jerome Powell that the central bank is not likely to raise interest rates by 75 basis points, stubbornly high inflation has set the Fed on a path of quantitative tightening and interest-rate advances that presents a risk to economic growth. April's solid jobs numbers (see below) suggest employers may be inclined to keep raising wages in order to attract workers, adding to inflationary pressures. Once again, tech shares took the brunt of the sell off, with only energy shares and utility stocks posting gains. The Nasdaq and the Russell 2000 each fell more than 1.2% last week, while the S&P 500 extended its losing streak after slipping 0.2%. Treasury bond prices continued to drop, pushing yields higher. Crude oil prices advanced again last week on supply concerns fueled by the impending European Union sanctions on Russian oil.

Stocks began last week on an uptick, likely influenced by dip buyers. Each of the benchmark indexes listed here gained ground, led by the Nasdaq, which rose 1.6% on the heels of a rally by several major tech companies. The Russell 2000 added 1.0%, the S&P 500 gained 0.6%, and the Dow climbed 3.0%. The Global Dow slid 0.5%. Ten-year Treasury yields traded near 3.0%, ending the day at 2.99%. The dollar rose $0.67 to reach $103.63 against a basket of foreign currencies. Crude oil prices increased $1.13 to $105.82 per barrel.

For the second session in a row, stocks ended the day higher last Tuesday as investors awaited Wednesday's expected Federal Reserve rate hike. The Russell 2000 (1.0%) and the S&P 500 (0.5%) led the indexes, followed by the Global Dow (0.8%). The Nasdaq and the Dow each gained 0.2%. Crude oil prices, 10-year Treasury yields, and the dollar declined. Gold prices advanced.

Wall Street rallied last Wednesday after Jerome Powell eased concerns that the central bank would pursue a more aggressive pace of tightening. Nevertheless, earlier in the day, the Federal Open Market Committee announced the steepest interest-rate hike in 20 years. Each of the benchmark indexes listed here posted notable gains, with both the Nasdaq and the S&P 500 adding 3.0%. The Dow jumped 2.8% and the Russell 2000 advanced 2.7%. The Global Dow rose 1.8%. Ten-year Treasury yields slid 4.3 basis points to 2.91%. The dollar dropped nearly 1.0%, while crude oil prices soared, adding $5.50 to reach $107.90 per barrel after the European Union proposed an import ban on Russian oil.

The Wall Street rally from last Wednesday reversed to a retreat last Thursday as stocks plunged by the end of trading. The Nasdaq fell 5.0%, the Russell 2000 dropped 4.3%, the S&P 500 slid 3.6%, and the Dow declined 3.1%. The Global Dow gave back 1.8%. Ten-year Treasury yields added nearly 15 basis points to close at 3.06%, the highest rate since 2018. The dollar rose to $103.50. Crude oil prices jumped to $108.25 per barrel.

Stocks fell again last Friday to end a roller coaster week. The small caps of the Russell 2000 (-1.7%) and the tech-heavy Nasdaq (-1.4%) led the declining indexes, followed by the S&P 500 (-0.6%), the Global Dow (-0.4%), and the Dow (-0.3%). Ten-year Treasury yields gained 5.7 basis points to end the week at 3.12%. Crude oil prices topped $110.00 per barrel after climbing $2.23. The dollar was little changed, while gold prices advanced $6.10 to $1,881.80 per ounce.


Market/Index

2021 Close

Prior Week

As of 5/6

Weekly Change

YTD Change

DJIA

36,338.30
32,977.21 32,899.37 -0.24% -9.46%

Nasdaq

15,644.97

12,334.64 12,144.66 -1.54%

-22.37%

S&P 500

4,766.18

4,131.93 4,123.34 -0.21% -13.49%

Russell 2000

 2,245.31 1,862.16

1,839.56

-1.21% -18.07%

Global Dow

4,137.63

3,815.07

3,805.92 -0.24%

 

-8.02%

Fed. Funds target rate

0.00%-0.25%

0.25%-0.50%

0.75%-1.00%

50 bps

75 bps

10-year Treasuries

1.51%

2.88%

3.12%

24 bps 161 bps

US Dollar-DXY

95.64

103.17

103.67

0.48% 8.40%

Crude Oil-CL=F

$75.44 $104.07 $110.56 6.24% 46.55%

Gold-GC=F

$1,830.30

$1,897.90 $1,882.10 -0.83%

 

2.83%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week's Economic News

  • As expected, the Federal Open Market Committee increased the target range for the federal funds rate by 50 basis points to 0.75%-1.00%. The Committee anticipates that ongoing increases in the target range will be appropriate. In addition, the FOMC decided to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1. In support of its decision, the Committee noted that, despite strength in household spending and employment, overall economic activity edged down in the first quarter, while inflation remained elevated. This led to supply-and-demand imbalances related to the pandemic, higher energy prices, and broader price pressures. The FOMC also said the implications on the U.S. economy resulting from the invasion of Ukraine by Russia are highly uncertain. However, the invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply-chain disruptions. The Committee made it a point to state that it is "highly attentive" to inflation risks.
  • The employment sector continued to show strength in April, with 428,000 new jobs added. Job gains were widespread, with the largest increases occurring in leisure and hospitality, in manufacturing, and transportation and warehousing. Total employment is nearing its February 2020 pre-pandemic level but remains down by 1.2 million, or 0.8%. In April, the unemployment rate, at 3.6%, was unchanged from the previous month, and the total number of unemployed persons edged down to 5.9 million. In another sign of the employment sector's recovery from the pandemic, both the unemployment rate and the total number of unemployed are near their February 2020 levels (3.5% and 5.7 million, respectively). In April, both the labor force participation rate, at 62.2%, and the employment-population ratio, at 60.0%, were little changed over the previous month. In April, 7.7% of employed persons teleworked because of the coronavirus pandemic, down from 10.0% in March. In April, 1.7 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, which is down 2.5 million from the previous month. Average hourly earnings rose by $0.10, or 0.3%, to $31.85 in April. Over the past 12 months, average hourly earnings have increased by 5.5%. The average work week was unchanged at 34.6 hours in April.
  • Manufacturing improved in April, according to the latest S&P Global US Manufacturing PMI™. The S&P Global US Manufacturing Purchasing Managers' Index™ posted 59.2 in April, up from 58.8 in March. The rate of growth accelerated for the third consecutive month and was the sharpest since last September. Contributing to the uptick in manufacturing was a faster rise in output during April as new orders increased. Although manufacturing expanded in April, severe material and capacity shortages at suppliers led to sharper increases in cost burdens and selling prices.
  • The S&P Global US Services PMI Business Activity Index registered 55.6 in April, down from 58.0 in March. The April reading marked an uptick in business activity in the services sector, but at a slower pace than in the previous month. At the same time, cost burdens rose substantially in April. Higher wage, transportation, and material costs drove up input prices. Service providers mentioned greater food, energy and fuel costs in particular. The rate of input price inflation accelerated for the third successive month to the fastest in more than 11 years. Service firms attempted to pass on the price increases to customers, which weighed on customer spending.
  • According to the latest Job Openings and Labor Turnover report, at the end of March there were 11.5 million job openings, the highest level in the history of the series, which began in December 2000. Job openings increased in retail trade (+155,000) and in durable goods manufacturing (+50,000). Job openings decreased in transportation, warehousing, and utilities (-69,000); state and local government education (-43,000); and federal government (-20,000). Also in March, there were 6.7 million hires. On the other side of the ledger, 6.3 million people were separated from their jobs, including 4.5 million quits and 1.4 million layoffs and discharges, along with 380,000 other separations. Over the 12 months ended in March, hires totaled 77.7 million and separations totaled 71.4 million, yielding a net employment gain of 6.3 million.
  • The goods and services trade deficit was $109.8 billion in March, up $20.0 billion, or 22.3%, from the February deficit. Exports increased 5.6% while imports vaulted 10.3% in March. Year to date, the goods and services deficit increased $84.8 billion, or 41.5%, from the same period in 2021. Exports increased $104.5 billion, or 17.7%. Imports increased $189.3 billion, or 23.8%. Of particular note, the trade in goods deficit with China increased $7.4 billion in March; the goods deficit with Canada rose $3.7 billion; while the goods deficit with the European Union decreased $1.3 billion.
  • The national average retail price for regular gasoline was $4.182 per gallon on May 2, $0.075 per gallon above the prior week's price and $1.292 higher than a year ago. Also as of April 25, the East Coast price increased $0.11 to $4.09 per gallon; the Gulf Coast price rose $0.07 to $3.86 per gallon; the Midwest price climbed $0.07 to $3.99 per gallon; the West Coast price increased $0.02 to $5.10 per gallon; and the Rocky Mountain price was unchanged at $4.19 per gallon. Residential heating oil prices averaged $4.78 per gallon on April 29, about $0.84 per gallon more than the prior week's price. U.S. crude oil refinery inputs averaged 15.5 million barrels per day during the week ended April 29, which was 218,000 barrels per day less than the previous week's average. During the week ended April 29, refineries operated at 88.4% of their operable capacity, and gasoline production increased, averaging 9.7 million barrels per day.
  • For the week ended April 30, there were 200,000 new claims for unemployment insurance, an increase of 19,000 from the previous week's level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended April 23 was 1.0%, unchanged from the previous week's rate. The advance number of those receiving unemployment insurance benefits during the week ended April 23 was 1,384,000, a decrease of 19,000 from the previous week's level, which was revised down by 5,000. This is the lowest level for insured unemployment since February 17, 1970, when it was 1,371,000. States and territories with the highest insured unemployment rates for the week ended April 16 were California (2.1%), New Jersey (2.1%), Alaska (1.9%), Minnesota (1.6%), New York (1.6%), Illinois (1.5%), Puerto Rico (1.5%), Connecticut (1.4%), Massachusetts (1.4%), Michigan (1.4%), and Rhode Island (1.4%). The largest increases in initial claims for the week ended April 23 were in New York (+4,760), Massachusetts (+3,491), Connecticut (+1,045), Georgia (+932), and New Jersey (+888), while the largest decreases were in California (-2,860), Ohio (-2,609), Michigan (-1,887), Washington (-475), and Minnesota (-453).

Eye on the Week Ahead

Inflation data for April is available this week, including the Consumer Price Index. Consumer prices advanced 1.2% in March and were up 6.5% since March 2021. The Producer Price Index is also available this week. March showed that prices at the producer level rose 1.4% and are up a notable 11.2% for the 12 months ended in March. Another indicator of inflationary trends is the report on import and export prices. Import prices climbed 2.6% in March, while export prices rose 4.5%. Since March 2021, import prices have risen 12.5%, and export prices have climbed 18.8%.

 

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