Weekly Recap | March 28, 2022

March 21-25, 2022 Recap

Stocks Advance Second-Straight Week

Bargain-Buying Continues
The S&P 500 capped its first back-to-back weekly gain since early February as investors largely overlooked expectations for a more hawkish pace of central bank rate hikes this year. Even as a more aggressive Fed policy stance may slow economic growth, the resulting escalation in commodity prices is seen easing, potentially allowing more bargain-buying for equity investors. In a Monday speech, Fed Chairman Powell stressed the need to restore price stability and indicated the Fed stands ready to hike interest rates in ½-point increments if necessary. Several strategists thereafter issued forecasts of at least two ½-point (+0.50% each) rate hikes going into the summer while others called for four ½-point hikes intermixed with more traditional ¼-point increases by the end of the year. Last week’s gains trimmed this year’s S&P 500 loss to 4.35%.

For the Week…
After gaining 6.2% the week prior, the S&P 500 advanced a further 1.81%, the Dow Industrials rose 0.31% and the tech-heavy Nasdaq Composite rallied 1.99%. Small cap stocks (Russell 2000) fell 0.38%, giving back a small portion of its 5.43% prior week gain.

Mortgage Activity Slows
Mortgage applications activity fell sharply, down 8.1% after declining 1.2% the week prior. Both components declined amid rising lending rates and record low supply of available homes for sale. Purchase activity fell 1.5%, while refinancings tumbled 14.4%. The average 30-year fixed mortgage rate jumped to 4.50% from 4.27%, representing the largest weekly increase since March 2020. 

Energy Extends its Sector Leadership
10 the 11 major sector groups posted gains last week led by Energy (+7.42%), Materials (+4.12%) and Utilities (+3.49%). Consumer Discretionary (+1.07%) and Real Estate (+0.37%) rose the least, while Healthcare (-0.21%) was the only decliner. Energy remains this year’s best performer, up 43.63%.

Treasury Prices Drop
Treasury prices continued to slide last week amid the hawkish overtones and the escalation of Russian attacks in Ukraine. On Monday, the day of Fed Chairman Powell’s speech, the yield on two-year Treasury notes leapt 18 basis points, its second-largest one-day advance since 2009. For the week, the yield on two- and five-year Treasuries rose 25 basis point and 40 basis points respectively, while the 10-year yield climbed 33 basis points to end the week at 2.485%. The U.S. Dollar Index capped a fourth-straight weekly gain (+0.57%). U.S. WTI crude oil futures climbed nearly $11 to end Friday at $113.90/barrel.

The Latest from @CeteraIM

Consumer Sentiment Plunges to August 2011 Low

Volatility Arrives in Spades

Inflation Should Slow in Second Half 2022

Economic Calendar

Monday, March 28
Goods-Only Trade Balance, Wholesale/Retail Inventories.

Tuesday, March 29
Case-Shiller Home Prices, JOLTS Job Openings, Consumer Confidence.

Wednesday, March 30
Mortgage Activity, ADP Private Payrolls, 4Q GDP.

Thursday, March 31
Jobless Claims, Personal Income/Spending, PCE Prices, MNI Chicago PMI.

Friday, April 1
Nonfarm Payrolls, Unemployment Rate, Construction Spending, ISM Manufacturing, S&P Global US Mfg (Mar final).

Initial jobless claims fell last week to the lowest level since September 1969. There were 187,000 initial claims, a drop of 28,000 from the week prior. The labor market remains very strong, though momentum could slow if the Federal Reserve hikes rates too aggressively.

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^Glossary

^{The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.}

^{The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.}

^{The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.}

^{The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.}

^{The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.}

^{The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.}

^{The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.}

^{The Bloomberg Barclays US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable 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, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.}

^{The Bloomberg Barclays US Municipal Bond 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. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.}

^{The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.}

^{The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.}

^{The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.}

^{The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.}

^{The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.}

^{The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.}