Weekly Market Commentary – 4/21/2023

-Darren Leavitt, CFA

US equities traded sideways throughout the week as investors contemplated Q1 earnings reports, more Fed rhetoric, and weakening economic data. International markets were also off for the week, with Chinese stocks taking a hit on concerns that more trade restrictions are forthcoming.

Earnings announcements during the week came in with mixed results. Tesla’s stock took a beating after they announced weaker-than-expected margins and the inclination to allow margins to compress further for higher deliveries. Regional banks sold off in the wake of Zion’s bad quarter and on continued attrition of bank deposits. Johnson and Johnson sold off, as did Freeport McMorran. Lockheed Martin was rewarded after a positive quarter, and Taiwan Semiconductor advanced even as they tempered forward guidance. This coming week the earnings calendar will be packed with Microsoft, Google, Amazon, and Meta, all slated to report.

This week, there was a full dose of Fed rhetoric reiterating that the Fed is likely to raise another 25 basis points at the May meeting (currently an over 80% probability being priced into the Fed funds futures) and that rates should remain higher for longer. Cleveland Fed President Mester thinks the Policy rate needs to be north of 5%, while Philadelphia Fed President Harker expressed concerns about how high inflation remains. Atlanta Fed President Bostic endorsed another rate hike in May, and St. Louis Fed President Bullard echoed concerns on the persistence of inflation.

Economic data for the week showed a weakening economy. Initial Jobless Claims increased by 5k to 245k, while Continuing Claims hit the highest reading since November of 2021 at 1.865M. Existing Home Sales fell 2.4% as weekly Mortgage applications decreased by 8.9%. The Philly Fed index saw its 8th straight decline and fell to a level not seen since May 2020 at -31.1%.   Global Manufacturing was generally weaker and still in contraction, while Services data showed expansion but at a declining rate.   US Leading Economic Indicators fell 1.2%; the street consensus was -0.4%.

The S&P 500 lost 0.1%, the Dow fell 0.23%, the NASDAQ gave back 0.47%, and the Russell 2000 retreated 0.63%. US Treasuries price fell again this week, with the 2-year yield increasing by six basis points to 4.16% and the 10-year yield increasing by five basis points to 3.57%. Bond prices fall when yields increase. Oil prices fell 5.6%, giving back much of what was made off the OPEC + production cuts. Oil and copper fell on the notion that economic growth would slow. Copper prices fell 3.16% or 0.13 cents to $3.98 an Lb.  Gold prices fell by $26.10 to $1991.10 an Oz.