Lower Inflation Lifts Spirits in Uneven Week:
The combination of an improving inflation outlook resulted in a week of uneven, albeit positive, performance, in which cyclical and financial stocks rallied while technology, real estate, and utilities lagged.
Over the last month, The Dow Jones Industrial Average returned 4.68%, while the S&P 500 returned 4.15%. The Nasdaq Composite Index returned 3.07%.
Source: Charles Schwab & Co, Inc.
Stocks treaded water ahead of last week’s inflation data and the start of a new earnings season. Stocks rallied on a favorable March consumer inflation report, only to falter after the release of last month’s Federal Open Market Committee (FOMC) meeting minutes, which hinted at a potential recession later this year.
After reports of a more pronounced slowdown in producer prices on Thursday, stocks surged higher, with technology and communication services companies leading the charge. A weak retail sales number on Friday shaved the gains to close out the week.
Last week provided fresh insight into inflation, and the news was encouraging.
The Consumer Price Index (CPI) rose a very modest 0.1% in March, while the year-over-year increase in consumer prices was 5.0%, down from February’s 12-month rise of 6.0%. Declines aided the March report in groceries, gasoline, medical care, and utilities.1
The read on supplier prices was even more positive. The Producer Price Index (PPI), which many economists see as a signal of future consumer prices, declined 0.5%–the most significant monthly decline since 2020. The 12-month increase as of March was 2.7%, an easing from February’s year-over-year climb of 4.9%.2
This Week: Key Economic Data
Source: Bloomberg Finance L.P.
This Week: Companies Reporting Earnings
At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.
Chief Investment Officer
Concord Asset Management
Footnotes and Sources
1The Wall Street Journal, April 12, 2023
2The Wall Street Journal, April 13, 2023
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