Weekly Recap | May 2, 2022

April 25-29, 2022 Recap

Equity Angst Intensifies

S&P 500 Suffers Worst Month Since Early 2020
All three major U.S. equity indices fell sharply last week, extending losses for the Dow Industrials and S&P 500 to cap their worst April performances since 1970. For the month, the benchmark S&P 500 fell 8.72%, its biggest monthly loss since the onset of the pandemic in March 2020. Domestic stocks dropped as investors weighed fresh inflation data, a contraction in 1Q gross domestic product (GDP) and disappointing forward earnings guidance from a pair of bellwether technology giants. Ongoing headwinds also weighed on investor sentiment, including COVID-19 lockdowns in Beijing and Shanghai which have aggravated supply-chain woes already disrupted by Russia’s war in Ukraine.

For the Week…
The S&P 500 fell 3.26%, extending its YTD loss to 12.92%. The Dow Jones Industrial Average fell the least, down 2.47%, and the Nasdaq Composite lost 3.92%. The S&P 500 remains in correction status a second week, down 13.5% from its January high, while the Nasdaq is in a bear market, plunging 23% from its November 2021 record.

PCE Rose Strongly
Consumer spending rose faster than expected in March. Personal consumption expenditures (PCE) rose 1.1%, versus expectations of +0.3%. Spending growth exceeded 1% for goods and services. Adjusted for inflation, spending increased by a more subdued 0.2% last month. The PCE price index (the Fed’s preferred measure of inflation) rose 0.9% M/M (+6.6% Y/Y, the most since 1982).

Materials Lag the Least
All 11 major sector groups ended negative for the week, with Consumer Discretionary (-7.88%), Real Estate (-5.65%) and Financials (-4.53%) falling the most. Technology (-1.26%), Energy (-1.23%) and Materials (-0.82%) had the smallest losses.

Treasury Yields Edge Lower
The yield on benchmark 10-year Treasury notes ended Friday at 2.887%, down just 1.5 basis points from the prior week-ending close of 2.902%.  Earlier in the week the 10-year yield had climbed as high as 2.93%. The U.S. Dollar Index strengthened to a fresh two-year high, strengthening last week by 1.72%. U.S. WTI crude oil futures ratcheted higher to $104.69/barrel last week, up from $102.07/barrel the week prior.

The Latest from @CeteraIM

Consumer Spending Tops Forecast

 U.S. Dollar Index at Two-Year High

 New Home Sales Inventory Rises

Economic Calendar

Monday, May 2
S&P Global US Manufacturing PMI, Construction Spending, ISM Manufacturing.

Tuesday, May 3
Factory Orders, Durable/Capital Goods Orders, Vehicle Sales.

Wednesday, May 4
Mortgage Activity, ADP Private Payrolls, US Trade Deficit, S&P Global US Services PMI, ISM Services, FOMC Rate & Policy Decisions.

Thursday, May 5
Jobless Claims, Worker Productivity, Unit Labor Costs.

Friday, May 6
US Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings, Consumer Credit.

The U.S. economy contracted for the first time since Q2 2020. U.S. real GDP growth was -1.4% annualized in Q1, slowing rapidly from +6.9% in Q4 2021. Consumption (+2.7%) and private investment (+2.3%) grew at a solid pace in the first quarter. However, net exports subtracted 3.2% from growth and inventories subtracted 0.8%.

^{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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^{No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The opinions expressed are as of the date published and may change without notice. Any forward-looking statements are based on assumptions, may not materialize, and are subject to revision.}

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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.}