Market In a Snap! April 3rd – April 7th, 2023

By: Dave Chenet, CFA, CAIA®

 CloseWeekly returnYTD return
S&P 5004,105-0.16%7.03%
Nasdaq Composite12,087-1.13%14.91%
Russell 2,0001,754-2.54%-0.05%
Crude Oil80.546.34%0.35%
US Treasury 10yr Yield 3.28%  

Source: YCharts, Yahoo! Finance, WSJ

Market Recap

Stock markets closed for the holiday shortened week on Thursday afternoon (the harder working bond market, however, has a shortened trading day on Friday).  Stocks finished the week lower as PMI & employment data came in weaker than expected.  Importantly, non-farm payrolls are set to be released on Friday morning, after publication of this newsletter.  Economist consensus expectations for the payroll report is to show 240,000 jobs added last month, down from 311,000 in January. Importantly, markets will also keep a close eye on the wage growth data, which is expected to come in at a 0.3% month-on-month gain.  A number below the consensus will support the narrative that the Fed will pause their interest rate hikes.  Hotter than expected wage growth would likely weigh on markets, increasing expectations of more hikes and lowering estimates of corporate profit margins.

What We’re Reading:

Reuters: China March services activity accelerates on new orders – Caixin PMI

WSJ: Stocks Haven’t Looked This Unattractive Since 2007

Liz Annn Sonders: Elevation: Largest Stocks to Market’s Rescue?

Chart of the Week:

The 2-year treasury yield minus the 3-month treasury yield has reached its lowest level in decades. This is a signal that the always forward-looking market is expecting that the Federal Reserve will not only stop raising short-term interest rates but will soon need to cut interest rates.  Falling inflation and signs of financial stress are raising expectations that policy makers will soon need to reverse course.

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