Broker Check
2/3 Market View Weekly: By the Numbers

2/3 Market View Weekly: By the Numbers

February 07, 2023

Rally Continues

Strong earnings reports and encouraging inflation data lifted stocks ahead of the Federal Open Market Committee’s (FOMC) decision on Wednesday to hike interest rates by 25 basis points. Markets rallied following the announcement, relieved that the increase was in line with expectations and buoyed by post-meeting comments in which Fed Chair Jerome Powell acknowledged the disinflationary forces in place.

Fresh earnings reports fueled further gains, with positive earnings surprises from several big-name technology companies that benefited the larger universe of Nasdaq-listed high-growth companies. Disappointing earnings from three mega-cap tech companies and a strong employment report triggered a Friday pull-back, paring the week’s gains.

Market Update1

Observations

The growth and tech-heavy NASDAQ led large cap domestic markets this week, returning +3.33%, while blue chips, as represented by the DJ Industrial Average, returned -0.15%.

Small cap stocks were the strongest performer with the Russell 2000 index returning +3.90%.

International stocks generally underperformed domestic stocks, with the MSCI EAFE returning +0.46% and the MSCI Emerging Markets losing ground, falling -1.18%, respectively.

International bonds outpaced domestic bonds in a fairly benign environment, with the Global Aggregate Bond Index returning +0.18% to the U.S. Aggregate Bond Index’s +0.03%. U.S. Corporate High Yield managed much better, returning +1.00% on the week.

If A Groundhog Sees Its Shadow: Punxsutawney Phil, Pennsylvania’s most famous groundhog, emerged from his Gobblers Knob burrow on February 2nd to see his shadow. And while the old folklore says if he sees his shadow, there will be six more weeks of winter (which is quite a drag), a more fun question is what it means for markets. A research paper written by Savva Shanaev and Arina Shuraeva of the U.K.’s University of Northumbria and Svetlana Fedorova of the Financial Research Institute of the Russia Ministry of Finance finds there is a “distinct calendar anomaly on the U.S. stock market associated with the Groundhog Day prognostication tradition across 1928 to 2021.” The paper finds “there are significant positive abnormal returns around the ‘prediction’ of an early spring while buy-and-hold returns around the ‘prediction’ of a long winter are 2.78% lower.” Here’s hoping the groundhog theory reverses this year.2

How Cold Was It?: One might have felt like they were on a polar expedition this past weekend in the Northeast as arctic air that descended on Saturday brought dangerously cold sub-zero temperatures and wind chills to the region, including a record-setting wind chill of minus 108 degrees Fahrenheit (minus 78 C) on the summit of Mount Washington in New Hampshire. The Mount Washington Observatory at the peak of the Northeast’s highest mountain, famous for its extreme weather conditions, also recorded an actual temperature of minus 47 (minus 44 C), tying an observatory record set in 1934 and a wind gust of 127 mph (204 kmh).3

Amazon Unprofitable: After a long run of surging profits from pandemic-era shopping sprees, Amazon is feeling the hangover. The retail and tech giant is reporting its first unprofitable year since 2014. Amazon lost $2.7 billion last year, the company said on Thursday. This was despite holiday-season sales growing 9%. Amazon's shares fell in after-hours trading. By far, the biggest culprit for Amazon's losses over the year was the company's hefty investment in the electric automaker Rivian whose value plummeted last year and ate into Amazon's bottom line.4

Reprinted with permission from BTN. Copyright © 2023 Michael A. Higley.

1 Data Obtained from Morningstar as of 2/3/2023
2 Punxsutawney Phil Saw His Shadow. What a Groundhog Means for the Stock Market. - MarketWatch
3 Mount Washington hit with record wind chill amid Northeast deep freeze | PBS NewsHour
4 Amazon reports its first unprofitable year since 2014 : NPR

Economic Definitions

Federal Reserve (Fed): The Federal Reserve System is the central banking system of the United States of America.

Federal Funds Rates (Fed Funds rate): The Federal funds rate refers to the target interest rate set by the Federal Open Market Committee (FOMC). This target is the rate at which commercial banks borrow and lend their excess reserves to each other overnight.

The European Central Bank (ECB): The European Central Bank manages the euro and frames and implements EU economic & monetary policy. Its main aim is to keep prices stable, thereby supporting economic growth and job creation.

Interest Rate On The Main Refinancing Operations: The interest rate on the main refinancing operations (MRO), which provide the bulk of liquidity to the banking system.

Interest Rate On The Marginal Lending Facility: The rate on the marginal lending facility, which offers overnight credit to banks from the Eurosystem.

Interest Rate On The Deposit Facility: The rate on the deposit facility, which banks may use to make overnight deposits with the Eurosystem.

The Bank of England (BoE): The Bank of England is the central bank of the United Kingdom. The BoE oversees monetary policy and issues currency. It also regulates banks, financial firms, and payment systems.

Bank Rate: Bank Rate determines the interest rate paid to commercial banks that hold money with the Bank of England. It influences the rates those banks charge people to borrow money or pay on their savings.

Employment Situation Summary (Jobs Report): The Employment Situation Summary released by the US Bureau of Labor Statistics is a report that presents statistics from two monthly surveys. The household survey measures labor force status, including unemployment, by demographic characteristics. The establishment survey measures nonfarm employment, hours, and earnings by industry.

Nonfarm Payrolls: This indicator measures the number of employees on business payrolls. It is also sometimes referred to as establishment survey employment to distinguish it from the household survey measure of employment.

Initial Jobless Claims: Initial unemployment claims track the number of people who have filed jobless claims for the first time during the specified period with the appropriate government labor office. This number represents an inflow of people receiving unemployment benefits.

Job Openings – JOLTS: This concept tracks the number of specific job openings in an economy. Job vacancies generally include either newly created or unoccupied positions (or those that are about to become vacant) where an employer is taking specific actions to fill these positions.

Unemployment Rate: The unemployment rate tracks the number of unemployed persons as a percentage of the labor force (the total number of employed plus unemployed). These figures generally come from a household labor force survey.

University of Michigan Consumer Sentiment Index: Consumer confidence tracks sentiment among households or consumers. The results are based on surveys conducted among a random sample of households. Target Audience: representative sample of US households (excluding Alaska and Hawaii). Surveys of Consumers collects data on consumer attitudes and expectations summarized in the Consumer Sentiment, in order to determine the changes in consumers' willingness to buy and to predict their subsequent discretionary expenditures. This Index is comprised of measures of attitudes toward personal finances, general business conditions, and market conditions or prices. Components of the Index of Consumer Sentiment are included in the Leading Indicator Composite Index. Unit: Index (Q1 1966=100)

Index Definitions

S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index.

Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978.

MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.

MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.

Bloomberg Barclays U.S. Agg Bond: The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

Bloomberg Barclays High Yield Corp: The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.

Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.

Bloomberg Barclays Municipal Bond Index: The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds.

Disclosures

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index.

In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.

The statements provided herein are based solely on the opinions of the Advisor Group Research Team and are being provided for general information purposes only. Neither the information nor any opinion expressed constitutes an offer or a solicitation to buy or sell any securities or other financial instruments. Any opinions provided herein should not be relied upon for investment decisions and may differ from those of other departments or divisions of Advisor Group or its affiliates.

Certain information may be based on information received from sources the Advisor Group Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Advisor Group Research Team only as of the date of this document and are subject to change without notice. Advisor Group has no obligation to provide updates or changes to these opinions, projections, forecasts and forward-looking statements. Advisor Group is not soliciting or recommending any action based on any information in this document.

Securities and investment advisory services are offered through the firms: FSC Securities Corporation, Royal Alliance Associates, Inc., SagePoint Financial, Inc., Triad Advisors, LLC, Infinex Investments, Inc., and Woodbury Financial Services, Inc., broker-dealers, registered investment advisers, and members of FINRA and SIPC. Securities are offered through Securities America, Inc., American Portfolios Financial Services, Inc., and Ladenburg Thalmann & Co., broker-dealers and member of FINRA and SIPC. Advisory services are offered through Arbor Point Advisors, LLC, American Portfolios Advisors, Inc., Ladenburg Thalmann Asset Management, Inc., Securities America Advisors, Inc., and Triad Hybrid Solutions, LLC, registered investment advisers. Advisory programs offered by FSC Securities Corporation, Royal Alliance Associates, Inc., SagePoint Financial, Inc., Securities America Advisors, Inc., Triad Advisors, LLC., and Woodbury Financial Services, Inc., are sponsored by VISION2020 Wealth Management Corp., an affiliated registered investment adviser.