Weekly Market Commentary – 2/10/2023

-Darren Leavitt, CFA

Wall Street pulled in its horns last week as investors sensed the market was overbought. Concerns about the outlook for corporate earnings and historically high valuations tempered buyers’ enthusiasm for equities. The prior week’s robust Employment Situation Report continued to weigh on investors’ sentiment as the realization that the Federal Reserve may need to hike more started to resonate. The entire yield curve shifted higher by roughly twenty basis points, and the probability of another 25 basis point hike from the Fed in May increased from 30% to 74%. Fed rhetoric throughout the week also supported the notion of a higher Fed Funds terminal rate.

Tensions between the US and China increased as the US shot down what appeared to be a Chinese spy balloon off the coast of South Carolina. President Biden’s State of the Union address had little effect on the markets as an agenda of more taxes and regulation will likely be squashed in a divided Congress.

Economic news on the week was relatively light. Initial claims came in at 196k versus the estimated 200k, while continuing claims came in at 1688k, up from the prior week’s reading of 1650k. The preliminary reading of the University of Michigan’s Consumer Sentiment was a tad higher than expected at 66.4. In the coming week, the economic data calendar will be packed with the Consumer Price Index, the Producer Price Index, Retail Sales, Industrial Production, and Housing starts.

The S&P 500 lost 1.1%, the Dow fell 0.2%, the NASDAQ gave back 2.4%, and the Russell 2000 declined 3.4%. US Treasuries endured a tough week as the 2-year note yield increased by twenty-two basis points to 4.51%. The 10-year bond yield rose by twenty-one basis points to 3.74%. The higher yields prompted a bid into the US Dollar, which has fallen nearly 10% from its most recent high. Oil prices rallied 8.7% over the week as Russia threatened to cut its oil production by 500,000 barrels per day in retaliation to international sanctions.   Gold prices were little changed, falling by $2.20 to close at $1873.90. Copper prices shed $.04, closing at $4.02 an Lb. Bitcoin fell nearly $2000 over the week to close at $21,892.

Investment advisory services offered through Foundations Investment Advisors, LLC (“FIA”), an SEC registered investment adviser. FIA’s Darren Leavitt authors this commentary which may include information and statistical data obtained from and/or prepared by third party sources that FIA deems reliable but in no way does FIA guarantee the accuracy or completeness.  All such third party information and statistical data contained herein is subject to change without notice.  Nothing herein constitutes legal, tax or investment advice or any recommendation that any security, portfolio of securities, or investment strategy is suitable for any specific person.  Personal investment advice can only be rendered after the engagement of FIA for services, execution of required documentation, including receipt of required disclosures.  All investments involve risk and past performance is no guarantee of future results. For registration information on FIA, please go to https://adviserinfo.sec.gov/ and search by our firm name or by our CRD #175083. Advisory services are only offered to clients or prospective clients where FIA and its representatives are properly licensed or exempted.