U.S. and International Equities
Markets Finish Higher
Markets reversed two consecutive weeks of lower closes to end the week higher. The Russia-Ukraine conflict and its effects on inflation had added to existing monetary policy uncertainty giving market participants pause earlier in the month. This week, traders added risk to portfolios amid pockets of increasingly attractive equity valuations and oversold conditions worldwide.
Energy, which has dominated all S&P 500 Index sector returns year to date, lost ground as oil prices slipped this week. Consumer discretionary along with other growth sectors rallied having been among the worst performing sectors so far in 2022.
Fixed Income Ends Mixed
The Bloomberg Aggregate Bond Index finished lower continuing its downward trend in 2022. However, this sentiment did not carry over to investment-grade credit, as tracked by the Bloomberg Credit Index. The Credit Index followed equities higher this week. In addition, high-yield corporate bonds, as tracked by the Bloomberg High Yield index, also caught a bid as traders took advantage of somewhat stretched spreads versus treasuries, which were at their highest level since 2020.
Commodities Mostly Lower
In what has been a banner year for the commodity so far in 2022, crude oil pulled back for the second straight week on concerns over China demand. Natural gas prices increased, reversing last week’s decline. Additionally, gold and silver finished the week lower while copper prices increased.
Economic Weekly Roundup
The Federal Reserve (Fed) ended its two-day Federal Open Market Committee (FOMC) meeting on Wednesday, and, as expected, the Committee voted to increase the fed funds rate by 25 basis points (0.25%). In addition, the Fed signaled that further rate increases were appropriate. In addition, the “dot plot” was released, which provides the individual member’s projections on the future path of interest rates. As of this week’s meeting, the median dot of the Committee, in aggregate, reflects seven interest rate hikes in total in 2022. This is an increase from three hikes just three months ago.
In addition, the Fed now forecasts 2.8% GDP growth in 2022, which is a decline from 4.0% in December. These lower growth expectations come amid higher inflation expectations with personal consumption expenditures (PCE) headline and core metrics, the Fed’s preferred inflation measures, now up to 4.3% and 4.1%. This is an increase from 2.6% and 2.7% in December, respectively.
Retail Sales Slip
February Retail Sales missed economists’ expectations. In addition, according to the Labor Department, consumer spending came in well below the increase in prices as Retail Sales numbers are not adjusted for inflation. The largest decline in retail sales came from online shopping, which declined by almost 4% month-over-month.
Jobless Claims Better than Expected
Initial claims for unemployment insurance for the week ending March 12 came in below last weeks’ total as well as below economists’ expectations. In addition, continuing claims declined marginally from the prior week, this was below economists’ estimates as well. The data continues to illustrate a tight labor market that is unlikely to dissuade the Fed from focusing on the inflation side of its mandate in the rest of 2022.
The following economic data is slated to be released during the week ahead:
- Wednesday: February Building Permits, New Home Sales
- Thursday: Weekly Initial and Continuing Unemployment Claims, Q4 Current Accounts, March Purchasing Managers’ (PMI) Index Composite, Markit PMI Manufacturing and Services Report, February Durable Orders
- Friday: March University of Michigan Sentiment, February Home Sales
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