|EQUITY MARKETS MOSTLY OFF THIS WEEK AS INFLATION COOLS AND CONSUMER SENTIMENT TAKES A STEEP DROP
Weekly Market Update — May 13, 2023
|Weekly Market Performance
*Source: Bonds represented by the Bloomberg Barclays US Aggregate Bond TR USD. This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.
Equity Markets Mostly Fall This Week
This week brought a mixed bag for the major U.S. equity indices as only NASDAQ was able to register a modest gain whereas the S&P 500, DJIA and Russell 2000 all reported losses.
The tech-heavy Nasdaq was helped by a surge in Google (Alphabet) after it debuted its new artificial intelligence-based search platform. The 30-stock, mega-cap DJIA on the other hand, was hurt by Disney, after its report of a decline in subscribers to its streaming platform, Disney+. Financial stocks continued to underperform primarily over worries
There was a lot of media coverage and angst over the looming debt ceiling date as the existing debt ceiling was hit on January 19th, forcing the U.S. Treasury to initiate extraordinary measures to pay for the country’s bills. And according to Treasury Secretary Yellen, those extraordinary measures will be exhausted by June 1st. A meeting at the White House on Tuesday did not seem to reach any results and Friday’s scheduled meeting was cancelled until next week.
The week’s most watched data was the release of the Consumer Price Index for April and it came in at 4.9%, a tad less than the 5.0% expected. The good news is that this was the smallest annual increase since April 2021 and the 10th straight month of improvement since inflation peaked in June of last year at 9.11%.
Unfortunately, gasoline prices rose from the previous month, but food prices dropped as it came in at an annual increase of 7.1%. Also, as in most of the past months, the biggest contributor to inflation was housing.
There was a lot more economic data reported this week, including:
Inflation Rises in April
The Consumer Price Index for All Urban Consumers rose 0.4% in April on a seasonally adjusted basis, after increasing 0.1% in March, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all items index increased 4.9% before seasonal adjustment.
“The index for shelter was the largest contributor to the monthly all items increase, followed by increases in the index for used cars and trucks and the index for gasoline. The increase in the gasoline index more than offset declines in other energy component indexes, and the energy index rose 0.6% in April. The food index was unchanged in April, as it was in March. The index for food at home fell 0.2% over the month while the index for food away from home rose 0.4%.
The all items index increased 4.9% for the 12 months ending April; this was the smallest 12-month increase since the period ending April 2021. The all items less food and energy index rose 5.5% over the last 12 months. The energy index decreased 5.1% for the 12 months ending April, and the food index increased 7.7% over the last year.”
Inflation Over the Past 20 Years
Consumer Sentiment Plummets
The University of Michigan reported that “consumer sentiment tumbled 9% amid renewed concerns about the trajectory of the economy, erasing over half of the gains achieved after the all-time historic low from last June. While current incoming macroeconomic data show no sign of recession, consumers’ worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff. Year-ahead expectations for the economy plummeted 23% from last month. Long-run expectations slid by 16% as well, indicating that consumers are worried that any economic downturn will not be brief. Throughout the current inflationary episode, consumers have shown resilience under strong labor markets, but their anticipation of a recession will lead them to pull back when signs of weakness emerge. If policymakers fail to resolve the debt ceiling crisis, these dismal views over the economy will exacerbate the dire economic consequences of default.”
In addition, “year-ahead inflation expectations receded slightly to 4.5% in May after spiking to 4.6% in April. After two years of relative stability, long-run inflation expectations rose to their highest reading since 2011, lifting from 3.0% last month to 3.2% this month.”
Vacancy Rates Higher Versus This Time Last Quarter and Last Year
The U.S. Census Bureau announced the following residential vacancies and homeownership statistics for the first quarter 2023:
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