Market In a Snap! April 24th – April 28th, 2023

By: Dave Chenet, CFA, CAIA

 CloseWeekly returnYTD return
S&P 5004,169.480.87%8.59%
Nasdaq Composite12,226.581.28%16.82%
Russell 2,0001,768.99-1.27%0.54%
Crude Oil76.65-0.22%-4.37%
US Treasury 10yr Yield3.45%  

Source: YCharts, Yahoo! Finance, WSJ

Market Recap

Strong earnings results from Meta, Microsoft and Alphabet pushed equity markets higher this week, with the tech-heavy NASDAQ leading gains.  On the economic front, a drawdown in business inventories led to a weaker-than-expected estimate of US economic growth for the first quarter of the year.  Partially offsetting the drawdown in inventory was a strong rise in consumer spending as purchases of motor vehicles and hospitality categories showed a still-tight labor market is encouraging spending.  Included in the GDP data, PCE inflation increased from a 3.6% pace in the fourth quarter to a 3.8% pace at the end of the first quarter.  Core PCE, which strips out food & energy, rose at a 4.9% pace.  Both estimates were above the level that had been anticipated by economists and confirmed to markets that the Federal Reserve is likely to raise short-term interest rates by 0.25% at the conclusion of its meeting next week.

What We’re Reading:

Bloomberg: Americans Go Deeper Into Debt as They Use Buy Now, Pay Later Apps for Groceries

Reuters: Sluggish growth and high inflation leave ECB in tight spot

Reuters: Yuan overtakes dollar to become most-used currency in China’s cross-border transactions

Chart of the Week:

Source: Jefferies

Market breadth has deteriorated, with just 32% of stocks outperforming the overall index.  In a similar fashion to 1999 & 2021, mega-cap tech names have led.   A market rally with such low participation, however, suggests increased market fragility.

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