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My view on what's going on in the financial markets and the global economy, and a few other things that might interest me from time to time.

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WEEKLY: Much ado about nothing

Week ended March 3, 2023



I was trying to find some interesting themes for the week, but there really wasn’t much I came across that was particularly inspirational or different than last week, or the weeks before. Earnings are nearly done now, and economic data releases were sparse. We did get a fairly good dose of the Fed talking heads on the circuit this week. Plenty of ECB governors and related officials were also out in Europe, talking up the hawkish path forward to address Eurozone inflation. The central bank that is sounding less hawkish now is the Bank of England, which unlike the Fed and the ECB, is facing a more severe case of economic gloom at home.


Yields in the US inched higher this week across the curve, with 10y and 30y UST yields closing above 4% on Thursday before settling back down on Friday. Although bonds were worse-off on the week, US stocks moved higher for the first week in four, as we bid “good riddance” to February. Friday was an especially strong day for US equities, as a solid “risk on” attitude grabbed investors, pushing the indices sharply higher on the day.


Companies in the news this week included:


  • Target (TGT): reported strong earnings but cautious on consumer discretionary spending in the future (stock flattish W-o-W)

  • Tesla (TSLA): apparently had an uninspiring investor day on Weds (stock flattish W-o-W)

  • Salesforce (CRM): strong beat on earnings and top-line, and bullish forecast leading to stock rally (stock up 14.9% WoW). Relevant because the stock’s underperformance has attracted activist investors like Elliott and Third Point.

Should you be interested in knowing more about this round of earnings in aggregate for S&P 500 companies, two very good sources of data for earnings are:

  • The Week in Earnings” from I/B/E/S data from RefinitivMarch 3, 2023 update is here, and

  • Earnings Insight” from FactSet Research – March 3, 2023 update is here.

I just penned a recap of February for Percent.com, which you can find here if you want to review market performance for the month.


Next week should prove more interesting, and the intensity will most certainly ramp up as we approach the week of March 20, which is when we get the next round of monetary policy decisions from the Fed, the ECB and the BoE. The coming week will feature a few things worth keeping an eye on, including back-to-back days for Mr Powell testifying to Congress on Tues and Weds (sure hope he says the right things!), a Bank of Japan monetary policy decision and some economic data that will catch investors’ attention, especially the February jobs report for the US due out on Friday.


It’s this constant back and forth in sentiment that is keeping investors interested as they seek direction, although my advice would be to pay more attention to the bond market than the stock market. I still consider bond investors to be “the grown-ups in the room”, noting however that there are no visible signs of credit stress in the market – at least not yet – in spite of underlying yields edging higher.


MARKETS

  • All of the equity indices EMC tracks were up for the week.

  • In the US, the Russell 2000 and the NASDAQ Comp continue to be the best performers YtD.

  • UST yields were higher at short and intermediate maturities, albeit the 30y yield was lower on the week. The shorter-end of the curve is now clearly signalling more than two 25bps increases in Fed Funds before the terminal rate is achieved. The inversion of the curve slightly moderated this week.

  • Credit spreads were a few basis points tighter this week in both investment grade and non-investment grade (high yield).

  • The US Dollar was a touch weaker on the week, as was the Yen as we look towards the BoJ monetary policy meeting this week.

  • Both gold and oil were also higher this week.

Below is a summary of markets for the week.


WHAT’S COMING THAT MATTERS

  • On Tues (Mar 7) Fed chairman Powell will give a testimony on ‘The Semi-annual Monetary Policy Report’ to Congress, during which the Committee on Banking, Housing, And Urban Affairs will meet in an open session in a hybrid format to conduct a hearing in which Powell will be the witness. Mr Powell will then testify before the House Financial Services Committee the following day, on Weds Mar 8th.

  • Economic data:

    • US: unemployment Feb and Michigan consumer sentiment (Fri)

    • UK: retail sales, Jan GDP, industrial and manufacturing data for Jan

    • China: CPI Feb

    • Japan: 4Q22 GDP data and household spending Jan

    • Eurozone: Feb retail sales and 4Q22 GDP

  • Upcoming central bank monetary policy meetings:

    • Federal Reserve – Mar 21st-22nd and May 2nd-3rd

    • Bank of England – Mar 23rd and May 11th

    • ECB – Mar 23rd and May 4th

    • Bank of Japan – Mar 9th-10th (this week) and Apr 27th-28th

THE TABLES


Global equities


US equities


US Treasuries


Corporate bonds (credit)




Safe haven and other assets




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