S&P 500: -0.10% DOW: -0.23% NASDAQ: -0.42% 10-YR: 3.57%
Last Week on WallStreet - April 22nd, 2023
Despite substantial intraday volatility, markets remained relatively range-bound as they digested the influx of corporate earnings, economic data, and Fed speakers. Although the majority of companies have either beaten or met expectations so far this earnings season, the broader trend of slowing earnings growth is causing concern about recession risks for late 2023. The Federal Reserve's tightening of policy over the past year is expected to result in a slowdown, but the extent and severity of the cooling remain a topic of intense debate.
Beneath the surface, Real Estate (1.6%), the biggest laggard over the past year, performed well this week as underlying home sales data indicated the market could be finding support. Defensive sectors such as Staples (1.8%) and Utilities (1.1%) found strength as economic fears intensified, while Energy (2.6%) and Communications (2.6%) names experienced the most pain.
Existing Home Sales Slide 2.4% in March
- Existing home sales in March retreated 2.4% from the month before to an annualized rate of 4.44 million
- The median sales price for an existing home also slipped to $375,700, down 0.9% from $379,300 a year ago
- Total inventory for housing at the end of March stood at 980,000 units, up 1.0% from February
- Three of the four US regions saw sales fall
The key takeaway - Despite solid gains in February providing a glimmer of hope that the housing market's decline was over, existing home sales resumed their decline in March to kick off the spring selling season. The housing market has been deteriorating for a year and a half, and although it is attempting to recover, it is facing challenges such as high borrowing rates. However, since the beginning of March, borrowing rates across the economy have moderated, which could result in an improved reading for home sales next month. Combined with other data, it seems the housing market could potentially be stabilizing.
China's Economy Grew 4.5% in the First Quarter, the Fasted Pace in a Year
- GDP grew by 4.5% in the first quarter, China’s National Bureau of Statistics
- The reading was above expectations of 4% and the highest reading in a year
- Retail sales jumped 10.6% and industrial output rose 3.9% in March
- Year-to-date fixed asset investment was weaker than expected and rose 5.1% compared with a year ago
- The value of China’s services sector also rose by 5.4% in the first quarter
The key takeaway - The COVID-19 pandemic has posed challenges for China's economy, with the delayed reopening of the economy raising questions about the country's ability to grow. However, the latest figures from the first quarter show a strong performance that exceeded expectations, indicating a promising recovery. Although this is a positive sign, the country still faces risks related to trade relations and the lingering effects of the zero-covid policy era.
Loans Decline After SVB Failure, Fed's Beige Book Finds, And Add to Stress on the Economy
- Lending in the U.S. declined after the failure of Silicon Valley Bank, per the Fed's survey
- Growth in employment “moderated” after a big burst of hiring early in the year
- The cost of materials and shipping costs for businesses showed notable declines “in recent weeks.”
- U.S. economic growth more broadly was “little changed” in the six weeks leading up to April 10
The key takeaway - The Beige Book is a report that summarizes data surveyed by the Federal Reserve in preparation for their FOMC meeting, providing insights into their view of the economy. According to the latest survey, there are signs that inflation is moderating, the hot jobs market is easing, and economic growth has slowed down. These factors suggest that the central bank will likely stick with the expected plan of another 25 basis point hike in two weeks. However, the reduction in lending activity since the bank panic is a long-term concern, as the declining availability of loans could negatively impact growth in the future.
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