Weekly Recap | March 20, 2023

March 13-17, 2023 Recap

Equities End Mixed

S&P 500 and Nasdaq Composite Post Weekly Gains
U.S. equities ended mixed last week amid a busy week of economic data that was overshadowed by continued fallout over the two simultaneous banking failures. U.S. regulators had quickly swept in to apply emergency measures to fully backstop depositors at Silicon Valley Bank and Signature Bank and offered other banks financing through a new Bank Term Funding Program (BTFP). While concerns linger, Treasury Secretary Yellen said on Thursday that the U.S. banking system remains sound. Markets rallied on the possibility of a more dovish Fed given the banking troubles.

For the Week…
Despite the banking angst, the S&P 500 gained 1.47%, trimming its mid-March month-to-date loss to 1.23%. The Dow Jones Industrial Average fell 0.15% and the tech-heavy Nasdaq Composite rebounded 4.44% to recover most of its 4.69% prior week plunge.

Mixed Economic Takeaways
The headline consumer price index (CPI) rose 0.4% in February, in line with forecasts. While the CPI is still up 6.0% from a year ago, inflation is at a 17-month low. U.S. retail sales fell 0.4% last month, a larger decline than economists expected (-0.1%). The University of Michigan’s Consumer Sentiment index fell to 63.4 in February from 67 the month prior, its first decline in four months.

Wide Ranging Sector Performance
Seven of the 11 major S&P 500 sector groups ended with gains last week. Communication Services (+6.94%), Technology (+5.97%) and Utilities (+3.96%) leg among gainers while Energy (-6.92%), Financials (-6.04%) and Materials (-3.41%) suffered the largest losses.

Treasury Yields Decline
Treasury yields broadly declined a second week as some market participants expect the Fed policymakers to lower their previously telegraphed March rate hike or even hold rates steady. The yield on benchmark 10-year notes ending Friday at 3.388%, down over -0.31% for the week prior. Gold prices ended the week at an 11-month high, surging 5.8% for the week.

The Latest from @CeteraIM

Market Breadth Weakens

Inflation Fears Ease 

Housing Starts Increase

Economic Calendar

Monday, March 20
No Major Releases.

Tuesday, March 21
Existing Home Sales. FOMC Meeting Begins.

Wednesday, March 22
Mortgage Applications, FOMC Rate & Policy Decisions.

Thursday, March 23
Jobless Claims, New Home Sales.

Friday, March 24
Durable Goods Orders, S&P Global Services & Mfg PMIs.

Driven by fallout from the recent bank closures, the implied fed funds rate for December dropped by 170 bps (-1.70%) between March 8 and the end of last week. The consensus expectation is that the Fed will still hike rates by 0.25% on Wednesday to a range of 4.75% to 5.0%, but the outlook is less clear after that. Assuming a rate hike on Wednesday, markets are pricing in four rate cuts by December. The Fed will update their rate projections on Wednesday. We will have a lot more clarity on their thinking in a few days.

^{This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.}

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^Glossary

^{The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.}

^{The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.}

^{The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index}

^{The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.}

^{The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.}

^{The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.}

^{The Bloomberg US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.}

^{The Bloomberg US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.}

^{The Bloomberg US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.}

^{The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.}

^{The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.}

^{The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.}

^{The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.}

^{The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.}

^{The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.}