Weekly Market Performance – Markets Finish Lower Amid Continued Inflation Concerns
U.S. and International Equities
Markets Finish Mixed
For the third straight week, the U.S. market indexes finished lower as the continued Eastern European conflict along with inflation concerns renewed investor worries about future corporate profits.
This week, Federal Reserve (Fed) Chairman Jerome Powell discussed the possibility of a half-point interest rate increase, which did not help market sentiment. International equities, per the MSCI EAFE and the MSCI EM indices, were not immune and also fell during the week. The MSCI EM index has been hampered by China’s COVID-19 lockdowns, slowing the country’s economic growth prospects.
Consumer staples have now enjoyed a strong showing for three consecutive weeks. Investors anticipating an economic slowdown continue to take refuge in this sector. The energy sector, which has been the sector leader so far for 2022, was a laggard this week as energy prices retreated. Growth sectors trailed for a second consecutive week as investors continue to take note of the Fed’s hawkish sentiment, selling off stocks with relatively higher valuations.
Fixed Income Lower
The Bloomberg Aggregate Bond Index finished lower for the third straight week, continuing to follow its downward trend that has prevailed so far in 2022. High-yield corporate bonds, as tracked by the Bloomberg High Yield index, also followed suit.
Crude oil prices finished lower this week on concerns of increased supply from the release of the international oil stockpile. In addition, worries over reduced demand relating to the Chinese COVID-19 lockdowns caused some selling. Moreover, after four consecutive higher weeks, natural gas prices pulled back. The commodity is still up almost 80% year-to-date. The major metal prices for gold, silver, and copper also finished the week lower. That being said, all three metals are still higher for 2022.
Economic Weekly Roundup
The Beige Book
The Federal Reserve (Fed) released its Beige Book this week. The Beige Book is a qualitative assessment of the economy based on comments from community bankers and business owners that is published two weeks before each Fed meeting. The most recent Beige Book had the highest level of words related to uncertainty since 2019. Given the geopolitical climate along with inflation and COVID-19, this isn’t too surprising. The LPL Research barometer of strong words minus weak words bounced back strongly compared to March. This could signal that Main Street businesses may see prospects of an improving economy after the first quarter’s weakness, presuming risks begin to subside.
Home Sales Decline
For the month of March, existing home sales dropped almost 3% on a month-to-month basis. In addition on a year-over-year basis sales declined 4.5%. The final inventory of unsold homes increased to 950,000 as the median home price ended March at just over 375K. This is up 15% from March of last year and is the 121 consecutive month of year-over-year increases, which is a new record. Higher home prices and mortgage rates appear to be causing buyers to delay home purchases.
Weekly Employment Report
Initial claims for unemployment insurance for the week ending April 16 came in below the previous’ week’s total but above economists’ expectations. In addition, continuing claims declined from the prior week which was also below economists’ estimates. Continuing claims reached their lowest level since February 1970. The data continues to illustrate a very tight labor market that is unlikely to dissuade the Fed from focusing on inflation in the near term.
The following economic data is slated to be released during the week ahead:
Tuesday: March building permits, durable orders, new home sales, February FHFA Home Price Index, S&P/Case-Schiller Home Price Index, April consumer confidence
Wednesday: March wholesale inventories and pending home sales
Thursday: Weekly initial and continuing unemployment claims, Q1 GDP
Friday: March personal consumption expenditure, personal income, April University of Michigan sentiment
Next week, we enter the heart of Q1 earning season with over 180 companies reporting results.
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