Tag: employment

Posted on

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.

Posted on

Market In a Snap! March 6th – March 10th, 2023

By: Dave Chenet, CFA, CAIA®

 CloseWeekly returnYTD return
    
S&P 5003,856.78-4.66%0.45%
Nasdaq Composite11,138.89-4.71%6.42%
Russell 2,0001,772.70-8.09%1.02%
Crude Oil76.50-3.61%-4.46%
US Treasury 10yr Yield3.695%  

Source: YCharts, Yahoo! Finance, WSJ

Market Recap

Markets finished the week on a negative tone, as tech-focused lender Silicon Valley Bank (SVB) was shuttered by US regulators.  SVB, the 16th largest bank in the U.S., ran into difficulties as withdrawal requests (a short-term liability to the bank) were backed by a portfolio of long-dated treasury and mortgage backed bonds (long-dated assets).  This liquidity mismatch, coupled with losses associated with the price of the bonds which had been purchased in a lower interest rate environment, prompted a failed attempt by the bank to raise additional capital.  The Federal Deposit Insurance Corporation (FDIC) will step-in to protect the insured deposits (the FDIC insures up to $250,000 SVB per depositor) and oversee the sale of remaining SVB assets to meet uninsured deposits.  SVB represents the 2nd largest US bank failure in history, behind only Washington Mutual in 2008.  The default drove significant losses across all sectors of the US market on Friday.

In contrast, economic news was positive on the margin, with Friday’s Nonfarm Payroll report showing employment rising by 311k jobs in February, higher than the 205k increase economists had expected.  The 6-month trailing average of 343k jobs/month is much higher than the estimated 100k/month additional jobs considered necessary to keep up with growth in the working-age population.  Encouragingly for those keeping a close eye on the likely path of monetary policy, wage growth slowed to a 3-month annualized pace of 3.6% from a 4.4% high.  Slowing wage growth eases upward pressure on inflation.

The broad US stock market has given back its year-to-date gains and is back to levels close to where it began the year.

What We’re Reading:

FT: SVB is not a canary in the banking coal mine

FT: China is right about US containment

Inflation in 2023: Causes, Progress and Solutions – Congressional Testimony of Mike Konczal

Chart of the Week:

One key recessionary warning (amongst many) is the persistent gap between wage growth and the rate of inflation.  The US economy is consumer-driven and consumers are continuing to see inflation eat away at their propensity to consume.  Consumer spending has been supported by the stimulus savings that consumers had put away, but the current personal savings rate and data related to credit card balances suggest that American are increasingly turning to debt to amid higher prices…at a time when higher interest rates mean increase the cost of servicing that new debt.

Advisory services are offered through Presidio Capital Management LLC, Registered Investment Advisers.  Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Presidio Capital Management, LLC unless a client service agreement is in place.