PAS Weekly Commentary

Technicals and rates dictating price action

The stock market was able to break its losing streak this week despite ongoing concerns about sticky inflation and the Fed raising rates higher for longer.  

The upside bias was supported by technical buying interest, along with a drop in market rates by the end of the week.  

There may have also been a feeling that the market was oversold on a short-term basis driving this week's gains. Entering Monday's session, the S&P 500 had declined 5.0% from its close on February 2 (the day before the January employment report was released). 

Inflation concerns were stoked this week by data releases, including the February ISM Manufacturing Index, the weekly initial jobless claims, and the revised Q4 productivity. Weekly claims remained remarkably low, reflecting a tight labor market, while Q4 unit labor costs rose 6.3% from the same quarter last year, reflecting stubbornly high wage-based inflation. The sticking point from the ISM Manufacturing Index was that the Prices Index rose to 51.3% from 44.5%, marking the first price increase in four months. This price data, we would add, followed a higher-than-expected February CPI reading for Germany. 

The Treasury market responded strongly to this week's data. The 10-yr note yield surged past 4.00%, hitting 4.07% at its high, before pulling back to 3.96% by Friday's close. The 2-yr note yield, which is more sensitive to changes in the Fed funds rate, rose eight basis points this week to 4.86%. 

Despite the rising market rates, the main indices held up okay thanks to technical support. Buyers stepped in when the S&P 500 breached its 200-day moving average, and by Friday's close the index was comfortably back above its 50-day moving average.  

Most of the S&P 500 sectors logged a gain this week led by materials (+4.0%), communication services (+3.3%), and industrials (+3.3%). The materials and industrials sectors may have been reacting to China reporting stronger-than-expected Manufacturing PMI and Non-Manufacturing readings for February. 

The only sectors to decline this week were utilities (-0.7%) and consumer staples (-0.4%).  

The U.S. Dollar Index fell 0.7% for the week to 104.50. 

WTI crude oil futures rose 4.6% this week to $79.79/bbl and natural gas futures surged 28.7% to $3.14/mmbtu.  

  • Nasdaq Composite: +2.6% for the week / +11.7% YTD 
  • Russell 2000: +2.0% for the week / +9.5% YTD 
  • S&P Midcap 400: +1.8% for the week / +9.0% YTD 
  • S&P 500: +1.9% for the week / +5.4% YTD 
  • Dow Jones Industrial Average: +1.8% for the week / +0.7% YTD 

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss. 

Data and rates used were indicative of market conditions as of the date shown and compiled by Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. 

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC. 

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2023-152070 (Exp. 6/23)