A new year did little to change the market’s overall tenor as trading remained choppy. The first two trading sessions of a holiday-shortened week saw major averages swing wildly between gains and losses as investors balanced an improving outlook on inflation against concerns of faltering economic growth. Mega-cap technology and other high-growth names endured the brunt of the selling pressure.
Stocks took a decisive turn lower Thursday on strong private payroll growth and declining jobless claims, which heightened fears that the Fed would need to push interest rates higher for longer. However, stocks staged a powerful rally on Friday despite another strong job number, partly due to a deceleration in wage growth.
A solid start to the year for equities with the S&P 500, NASDAQ, and the Dow Jones Industrial all in positive territory.
Mid Cap stocks as represented by the Russell Mid Cap outperformed their small and large-cap brethren, returning 2.18%
Bonds were also positive across the board, with domestic bonds outpacing international bonds. U.S. Bonds, represented by the Bloomberg U.S. Agg Bond Index returned 1.85%, while international bonds, represented by the Bloomberg Global Aggregate Index returned 1.39%
Big Tech Stocks Fall From Glory: FAANG stocks, for the better part of the last decade, have been driving the stock market’s gains. Facebook (Meta Platforms,) Amazon, Apple, Netflix and Google (Alphabet) offered consistently strong gains year in and year out, exciting investors and reinforcing biases that there was nowhere to go for these stocks but up. That all came to a screeching halt in 2022 following the Fed’s aggressive rate hiking campaign to control inflation. Meta plunged 64% in 2022; Netflix declined 51%; the other three stocks dropped at least 27%. Together, the FAANG stocks shed more than $3 trillion in market value, helping drag the broader stock market down with them. The S&P 500 sank 19%, its worst year since the 2008 financial crisis.2
How Long for a Table: People in Tokyo will often wait 3 hours or more for a taste of the rice ball at a popular and compact eatery in Tokyo's Toshima ward, called Onigiri Bongo. The restaurant has served one of Japan's most humble foods, the onigiri, or rice ball, for some 60 years. Owner Yumiko Ukon “scoops rice from a huge pot, putting it in triangular molds and packing them with a variety of fillings — more than 50, including standards such as bonito or salmon flake, pickled plum, mustard greens and cod roe, and innovations such as pork and kimchi, and fried chicken with mayonnaise and soy sauce.” The restaurant serves between 1,200 and 1,500 onigiri every day.3
Was it Brady or Belichick: The New England Patriots lost to the Buffalo Bills 35-23 on Sunday, eliminating the Patriots from playoff contention. The Patriots will now have missed the playoffs in two of the last three seasons and representing the fourth time in 23 seasons under head coach Bill Belichick.4 While Belichick’s former quarterback of 20 years in New England Tom Brady, lead the 8-9 Tampa Bay Buccaneers to become just the sixth team in NFL history to make playoffs with a losing record.5 The only year that Brady missed the playoffs as a starting quarterback came in 2002, when the New England Patriots finished 9-7.
Reprinted with permission from BTN. Copyright © 2023 Michael A. Higley.
1 Data Obtained from Bloomberg as of 1/6/2023
Job Openings – JOLTS: This concept tracks the number of specific job openings in an economy. Job vacancies generally include either newly created or unoccupied positions (or those that are about to become vacant) where an employer is taking specific actions to fill these positions.
Nonfarm Payrolls: This indicator measures the number of employees on business payrolls. It is also sometimes referred to as establishment survey employment to distinguish it from the household survey measure of employment.
ISM Manufacturing Index: PMI Surveys track sentiment among purchasing managers at manufacturing, construction and/or services firms. An overall sentiment index is generally calculated from the results of queries on production, orders, inventories, employment, prices, etc.
ISM Services Index: PMI Surveys track sentiment among purchasing managers at manufacturing, construction and/or services firms. An overall sentiment index is generally calculated from the results of queries on production, orders, inventories, employment, prices, etc. Target Audience: supply management professionals Sample Size: 300 individuals Date of Survey: through the month The Services Index is a composite index of four indicators with equal weights: Business Activity, New Orders, Employment and Supplier Deliveries. An index reading above 50% indicates an expansion and below 50% indicates a decline in the non-manufacturing economy. Where as per Supplier Deliveries Index, above 50% indicates slower deliveries and below 50% indicates faster deliveries.
Federal Reserve (Fed): The Federal Reserve System is the central banking system of the United States of America.
Federal Funds Rates (Fed Funds rate): The Federal funds rate refers to the target interest rate set by the Federal Open Market Committee (FOMC). This target is the rate at which commercial banks borrow and lend their excess reserves to each other overnight.
CPI (headline and core): Consumer prices (CPI) are a measure of prices paid by consumers for a market basket of consumer goods and services. The yearly (or monthly) growth rates represent the inflation rate.
University of Michigan Consumer Sentiment Index: Consumer confidence tracks sentiment among households or consumers. The results are based on surveys conducted among a random sample of households. Target Audience: representative sample of U.S. households (excluding Alaska and Hawaii). Surveys of Consumers collects data on consumer attitudes and expectations summarized in the Consumer Sentiment, in order to determine the changes in consumers' willingness to buy and to predict their subsequent discretionary expenditures. This Index is comprised of measures of attitudes toward personal finances, general business conditions, and market conditions or prices. Components of the Index of Consumer Sentiment are included in the Leading Indicator Composite Index. Unit: Index (Q1 1966=100)
S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index.
Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978.
MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.
MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.
Bloomberg Barclays U.S. Agg Bond: The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Bloomberg Barclays High Yield Corp: The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate 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. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.
Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
Bloomberg Barclays Municipal Bond Index: The Bloomberg Barclays U.S. Municipal 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.
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1/6 Market View Weekly: By the Numbers
January 10, 2023