Weekly Market Insights
January 27, 2023 Volume 10 Issue 4
Signs that inflation continues to moderate combined with better-than-expected economic data pushed equity markets solidly higher for the week with the tech heavy NASDAQ again outperforming the broader markets, as investors look ahead to the FOMC’s first meeting of the year.
- The Commerce Department’s initial reading of Q4’s Gross Domestic Product indicated that the US economy expanded at an annualized rate of 2.9%, slightly above the gain of 2.8% expected by economists. Growth in the second half of the year more than offset declines in the first half of the year, resulting in a gain of 2.1% for 2022, but down from 5.9% in 2021.
- The PCE Price Index, the Fed’s preferred inflation gauge, rose a modest 0.1% in December. Last month’s increase was led by a 0.2% gain in food prices, while energy prices slid 5.1%. Excluding the cost of food and energy, PCE rose 0.3%. On a y/y basis, the PCE Price Index eased to 5% from 5.5% in November, while core PCE eased to a 14-month low of 4.4%.
- The S&P Global Flash US Composite PMI increased 1.6 points to 46.6, a three-month high, although still in contraction territory since July 2022. The increase was led by the Services PMI which rose 1.9 points to 46.6, while the Manufacturing PMI edged up 0.6 points to 46.8, as business activity continued to shrink at the start of 2023, albeit at a slower pace.
- The Conference Board’s Leading Economic Index (LEI) fell 1.0% in December, its tenth consecutive decline, and well below expectations. Seven of the ten LEI components made negative contributions at yearend, while the six-month annualized rate of change slid 4.2%, signaling an elevated risk of recession in the coming months.
- Initial claims for unemployment insurance fell by 6,000 last week to 186,000, the lowest level since April 2020, and well below expectations. Continuing claims edged up to 1.675 million but remain historically low, suggesting that laid off employees are able to find new jobs relatively quickly, indicating continued strength in labor demand.
The Week Ahead:
- Economic releases will include final readings on services and manufacturing activity for the month of January, consumer confidence, factory orders and the all-important employment situation report.
- The FOMC is widely expected to raise the federal funds rate by 0.25% to a range of 4.50% to 4.75%.
Have a great weekend.
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*All economic release data referenced from public sources believed to be accurate. *The source of data for all charts/graphs included in this presentation is Bloomberg LP. *Figures quoted represent monthly changes (m/m) and are seasonally adjusted.