Month: February 2023

The Markets (as of market close February 28, 2023)

February saw stocks slide lower after posting solid gains to begin the year. Each of the benchmark indexes listed here retreated from their January totals, with the Dow falling the furthest, followed by the Global Dow, the S&P 500, the Russell 2000, and the Nasdaq. Investors saw hope in January that inflation may be waning, February data showed inflationary pressures reversed course and expand. The Federal Reserve consistently maintains that it seeks to achieve maximum employment and inflation at the rate of 2.0%. So far in 2023, job growth has been solid, with more than 500,000 new hires, while the Consumer Price Index (+0.5%) and the Personal Consumption Expenditures Price Index (+0.6%) revealed increasing inflationary pressured over the previous month. Inflation has risen 5.4% since January 2022, according to the latest PCE price index. With evidence that the economy can withstand further tightening, the Federal Reserve is likely to continue to drive interest rates higher and for a longer period of time. This, coupled with lagging corporate earnings and the Russia/Ukraine war, which enters its second year, has caused some investors to move from risk.

Several market sectors posted solid gains in February, while others lagged. Consumer discretionary and information technology increased by about 16.9% and 7.2%, respectively. On the other hand, health care (-4.5%), utilities (-6.3%), and energy (-3.7%) lost ground.

Manufacturing activity changed little in January from the previous month. Durable goods orders declined in January after climbing in December. The purchasing managers’ index declined in January as weak customer demand resulted in subdued sales. Meanwhile, input costs and output charges rose at increased rates as price pressures strengthened again.

Corporate earnings in the fourth quarter were generally subpar. Roughly half of the S&P 500 companies have reported above-estimated earnings thus far in the fourth quarter. That is below both the 5-year and 10-year averages. It is possible that fourth-quarter earnings for S&P 500 companies could decline, which would mark the first time the index has reported a year-over-year decrease in earnings since the third quarter of 2020.

Bond prices fell in February, driving yields higher. Ten-year Treasury yields rose 39 basis points from January. During the last day of February, the yield hit 3.98%, reaching its highest level since November 2022. The 2-year Treasury yield ended the month at 4.82%. The dollar advanced lower against a basket of world currencies. Gold prices fell nearly $110.00 per ounce in February.

Crude oil prices declined in February for the fourth straight month. Oil prices have fallen due to an unusually warm winter in the United States and Europe. In addition, rising inflation and interest rates have pushed against oil prices, while driving the dollar higher. The retail price of regular gasoline was $3.379 per gallon on February 20, $0.110 less than January’s price, and $0.151 lower than a year ago.

Stock Market Indexes

Market/Index	2022 Close	Prior Month	As of February 28	Monthly Change	YTD Change
DJIA	33,147.25	34,086.04	32,656.70	-4.19%	-1.48%
Nasdaq	10,466.48	11,584.55	11,455.54	-1.11%	9.45%
S&P 500	3,839.50	4,076.60	3,970.15	-2.61%	3.40%
Russell 2000	1,761.25	1,931.94	1,896.99	-1.81%	7.71%
Global Dow	3,702.71	3,990.37	3,881.41	-2.73%	4.83%
Fed. Funds target rate	4.25%-4.50%	4.25%-4.50%	4.50%-4.75%	25 bps	25 bps
10-year Treasuries	3.87%	3.52%	3.91%	39 bps	4 bps
US Dollar-DXY	103.48	102.08	104.95	2.81%	1.42%
Crude Oil-CL=F	$80.41	$79.08	$76.86	-2.81%	-4.41%
Gold-GC=F	$1,829.70	$1,944.00	$1,834.20	-5.65%	0.25%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.

Latest Economic Reports

• Employment: Job growth remained strong in January with the addition of 517,000 new jobs following a net upward revision of 37,000 to 260,000 in December. Despite federal interest-rate hikes aimed at slowing the economy and inflation, there is little evidence that the supply of labor is peaking. In January, notable job gains occurred in government, leisure and hospitality, professional and business services, and health care. The unemployment rate edged down 0.1 percentage point to 3.4%. The number of unemployed persons was relatively unchanged at 5.7 million in January. In January, both the employment-population ratio, at 60.2%, and the labor force participation rate, at 62.4% were unchanged from the previous month. Both measures have shown little net change since early 2022. In January, average hourly earnings increased by $0.10 to $33.03. Over the past 12 months ended in Janury, average hourly earnings rose by 4.4%. The average workweek increased by 0.3 hour to 34.7 hours in January, down from 34.4 hours in December.
• There were 192,000 initial claims for unemployment insurance for the week ended February 18, 2023. The total number of workers receiving unemployment insurance was 1,654,000. By comparison, over the same period last year, there were 198,000 initial claims for unemployment insurance, and the total number of claims paid was 1,633,000.

• FOMC/interest rates: The Federal Open Market Committee met on the last two days of January, at which time the Committee increased the Federal Funds target rate range by 25 basis points to 4.25%-4.50%. The statement from the FOMC indicated that, while inflation has eased somewhat, it remained elevated. The Committee also noted that it would consider both the extend and the pace of rate increases in the future.

• GDP/budget:The economy, as measured by gross domestic product, accelerated at an annual rate of 2.7% in the fourth quarter of 2022, according to the second estimate. GDP increased 3.2% in the third quarter after falling in the first and second quarters, 1.6% and 0.6%, respectively. Consumer spending, as measured by the personal consumption expenditures index, rose 1.4% in the fourth quarter compared to an increase of 2.3% in the third quarter. Spending on services rose 2.4% in the fourth quarter compared with a 3.7% increase in the third quarter. Consumer spending on goods actually decreased 0.5% in the fourth quarter after decreasing 0.4% in the third quarter. Fixed investment fell 4.6% in the fourth quarter (-3.5% in the third quarter), pulled lower by a 25.9% drop in residential fixed investment. Nonresidential (business) fixed investment rose 3.3% in the fourth quarter. Exports fell 1.6% in the fourth quarter, compared with a 14.6% increase in the previous quarter. Imports, which are a negative in the calculation of GDP, fell 4.2% in the fourth quarter, following a 7.3% decline in the third quarter. Consumer prices increased 3.7% in the fourth quarter (4.3% in the third quarter). Excluding food and energy, consumer prices advanced 4.3% in the fourth quarter (4.7% in the third quarter). In 2022, GDP increased 2.1%, compared with an increase of 5.9% in 2021. The PCE price index increased 6.3%, compared with an increase of 4.0% in 2021. Excluding food and energy prices, the PCE price index increased 5.0%, compared with an increase of 3.5% in 2021.
• January saw the federal budget deficit come in at $38.8 billion, $46.2 billion less than the December deficit but $157.5 billion above the January 2022 deficit. The deficit for the first four months of fiscal year 2023, at $460.2 billion, is $192.1 billion more than the first four months of the previous fiscal year. In January, government receipts totaled $447.3 billion and $1,472.8 trillion for the current fiscal year. Government outlays were $486.1 billion in January and $1,933.0 trillion through the first four months of fiscal year 2023. By comparison, receipts in January 2022 were $465.1 billion and $1,516.9 trillion through the first four months of the previous fiscal year. Expenditures were $346.4 billion in January 2022 and $1,775.9 trillion for the year.

• Inflation/consumer spending: Inflationary pressures reversed course, showing a notable increase in January. According to the latest Personal Income and Outlays report, the Personal Consumption Expenditures Price Index increased 0.6% in January and 5.4% since January 2022. Prices excluding food and energy jumped 2.0% following increases of 0.2% in November and December. Prices for both goods and services increased 0.6% in January, with prices for food rising 0.4% and energy up 2.0%. Since January 2022, consumer prices for food increased 11.1% and 9.6% for energy. Personal income rose 0.6%, while disposable personal income increased 2.0% in January. Consumer spending advanced 1.8% in January after declining 0.1% the previous month.
• The Consumer Price Index rose 0.5% in January after increasing 0.1% (revised) in December. Over the 12 months ended in January, the CPI advanced 6.4%, down minimally from 6.5% for the year ended in December. Excluding food and energy prices, the CPI rose 0.4% in January and 5.6% over the last 12 months. Prices for shelter, up 0.7%, were by far the largest contributor to the January CPI increase, accounting for nearly half of the overall advance. In January, food prices rose 0.5%, while energy prices increased 2.0% after falling 3.1% in December. For the 12 months ended in January, energy prices increased 8.7%, food prices rose 6.4%, and prices for shelter advanced 7.9%.
• Prices that producers receive for goods and services rose 0.7% in January after declining 0.2% in December. Producer prices increased 6.0% for the 12 months ended in January after rising 6.5% in 2022. In January, the PPI index saw prices for both goods (1.2%) and services (0.4%) increase. The January advance in producer prices for goods was the largest monthly gain since June 2022. Producer prices less foods, energy, and trade services rose 0.6% in January after increasing 0.2% in the previous month. Prices less foods, energy, and trade services advanced 4.5% for the year ended in January, following a 4.7% rise in 2022.

• Housing: Sales of existing homes decreased for the twelfth consecutive month after declining 0.7% in January. Existing home sales dropped 36.9% from January 2022. Limited inventory and rising mortgage rates contributed to the decrease in existing-home sales. The median existing-home price was $359,000 in January, lower than the December price of $366,500 but higher than the January 2022 price of $354,300. Unsold inventory of existing homes represents a 2.9-month supply at the current sales pace, unchanged from the December. Sales of existing single-family homes dropped 0.8% in January and 36.1% from January 2022. The median existing single-family home price was $363,100 in January, down from $372,000 in December but higher than the January 2022 price of $360,700.
• New single-family home sales advanced in January, climbing 7.2% and marking the third consecutive monthly increase. However, sales are down 19.4% from January 2022. The median sales price of new single-family houses sold in January was $427,500 ($465,600 in December). The January average sales price was $474,400 ($544,200 in December). The inventory of new single-family homes for sale in January represented a supply of 7.9 months at the current sales pace, down marginally from the December estimate of 8.7 months.

• Manufacturing: Industrial production was unchanged in January, following a 0.6% decrease in December. Industrial production has not increased since July 2022. Manufacturing increased 1.0% in January (-1.3% in December) and mining Increased 2.0%. Utilities, on the other hand, fell 9.9% as unseasonably warm weather in January depressed the demand for heating. Over the 12 months ended in January, total industrial production was 0.8% above its year-earlier reading.
• January saw new orders for durable goods decrease 4.5%, after increasing 5.1% in December. Durable goods orders have declined two of the last three months with the January decrease. Excluding transportation, new orders increased 0.7% in January. Excluding defense, new orders decreased 5.1%. Transportation equipment, also down two of the last three months, contributed to the January decrease, falling 13.3%. Under transportation, new orders for nondefense aircraft and parts plunged 54.6% in January, while defense aircraft and parts rose 5.5%. New orders for capital goods decreased 12.8% in January, pulled lower by a 15.3% decline in new orders for nondefense capital goods. New orders for defense capital goods rose 3.8%.

• Imports and exports: January saw import prices fall 0.2%, following a revised 0.1% decline in December. Import prices have not advanced since June 2022. Despite the recent declines prices for U.S. imports rose 0.8% over the past year, the smallest year-over-year increase since the period ended in December 2020. Import fuel prices decreased 4.9% in January, after falling 4.4% in December. Import petroleum prices have not recorded a 1-month advance since June 2022. Nonfuel import prices climbed 0.3% in January, after advancing 0.4% in December. Nonfuel import prices rose 0.8% in since January 2022, the smallest annual advance since August 2020. Export prices rose 0.8% in January, the first monthly increase since June 2022. Exports rose 2.3% over the past 12 months, the smallest over-the-year advance since December 2020.
• The international trade in goods deficit was $91.5 billion in January, up $1.8 billion, or 2.0%, from December. Exports of goods for January were $736.8 billion, $7.0 billion, or 4.2%, more than December exports. Imports of goods were $265.3 billion in January, $8.8 billion, or 3.4%, more than in December. The January increase in exports was largely attributable to a 14.8% jump in consumer goods and an 8.2% increase in automotive vehicles. In January, auto imports were up 9.0%, while imports of consumer goods rose 6.4%.
• The latest information on international trade in goods and services, released February 7, is for December and shows that the goods and services trade deficit was $67.4 billion, an increase of $6.4 billion from the November deficit. December exports were $250.2 billion, $2.2 billion, or 0.9%, less than November exports. December imports were $317.6 billion, $4.2 billion, or 1.3%, more than November imports. For 2022, the goods and services deficit increased $103.0 billion, or 12.2%, from 2021. Exports increased $453.1 billion, or 17.7%. Imports increased $556.1 billion, or 16.3%.

• International markets: The Organization for Economic Co-operation and Development (OECD) recently indicated that the global economic outlook is slightly brighter this year, although inflation remains a challenge. As Russia’s war with Ukraine approaches its second year, energy and food prices, which had moved higher, impacted by the war, are now substantially lower. Nevertheless, inflation remains elevated, prompting the central banks of several countries to continue to hike interest rates. The European Central Bank and the Bank of England raised rates by 50.0 basis points in February. Despite stubborn inflation, global economies seem to be rebounding. The Eurozone S&P purchasing managers’ index for services in February reached its highest level since May 2022. The United Kingdom’s Consumer Price Index retreated to 10.1% over the 12 months ended in January, down from 10.5% for the 12 months ended in December. For February, the STOXX Europe 600 Index added 1.8%; the United Kingdom’s FTSE advanced 1.2%; Japan’s Nikkei 225 Index gained 0.4%; and China’s Shanghai Composite Index rose 0.7%.

• Consumer confidence: The Conference Board Consumer Confidence Index® decreased in February for the second consecutive month. The index stands at 102.9, down from 106.0 in January. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, rose to 152.8 in February, up from 151.1 in the previous month. The Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — fell to 69.7 in February, down from 76.0 in January. According to the Conference Board’s report, an Expectations Index reading below 80.0 could signal a recession within the next year. It has been below this level for 11 of the past 12 months.

Eye on the Month Ahead

Inflation accelerated in February after showing signs of slowing in the previous month. Investors hope March data will show price pressures begin to decelerate again. Rising inflation and strong job growth support more rate hikes from the Federal Reserve when it next meets in late March.

The Markets (as of market close February 24, 2023)

Wall Street reacted negatively to hotter-than-expected inflation data at the end of last week. Each of the benchmark indexes listed here closed lower, with the Nasdaq falling more than 3.3%, while the remaining indexes suffered losses close to 3.0%. The S&P 500 endured its worst week in 2023, while Treasury yields climbed higher, as bond prices fell on weakened demand. The dollar advanced, gold prices sank, and crude oil prices ended last week marginally higher following a late-week surge. With the latest inflation data for January out, investors expect the Federal Reserve to ramp up interest rates in both amount and duration.

With the markets closed last Monday for Presidents’ Day, Wall Street opened last Tuesday on a sour note, with stocks recording their worst day in two months. The Chicago Board Options Exchange (CBOE) Volatility Index rose above 23.0, its second-highest level of the year, before settling marginally lower. The Global Dow dipped 1.3%, which was the smallest loss among the benchmark indexes listed here. The remaining indexes fell by at least 2.0%, with the Russell 2000 (-3.0%) and the Nasdaq (-2.5%) falling the furthest. The S&P 500 and the Dow fell 2.0%. Bond prices sagged, with the yield on 10-year Treasuries climbing 12.7 basis points to 3.95% — the highest rate since November. With recent economic data continuing to show at least moderate strength and consumer prices rising, investors saw the Federal Reserve poised to continue to hike interest rates for the foreseeable future. The dollar climbed higher, while gold prices fell. Crude oil prices dropped more than a quarter of a percent to $76.05 per barrel.

Stocks ended last Wednesday mixed, with the Nasdaq (0.1%) and the Russell 2000 (0.3%) closing higher, while the Global Dow (-0.8%), the Dow (-0.3%), and the S&P 500 (-0.2%) closed lower. Investors pored over the minutes from the last meeting of the Federal Open Market Committee, held earlier this month, to gauge where the Committee may be headed with further interest rate hikes. Ten-year Treasury yields dipped lower, closing at 3.92%. Crude oil prices continued to slide, falling to $73.91 per barrel. The dollar advanced, while gold prices declined.

Investors saw stocks rebound last Thursday, ending four sessions of middling to declining returns. The large caps of the S&P 500 gained 0.5% and the Dow rose 0.3% by the close of a back-and-forth day of trading. The Nasdaq and the Russell 2000 advanced 0.7% to top the benchmark indexes listed here. The Global Dow ended the day flat. Ten-year Treasury yields fell 4.4 basis points to 3.87% as bond prices increased. Crude oil ended a streak of losses, gaining 2.2% to reach $75.57 per barrel. The dollar edged lower, while gold prices lost nearly $11.00, falling to $1,830.60 per ounce.

A rise in consumer prices was enough to pull stocks lower last Friday. Each of the benchmark indexes listed here ended the day in the red, with the Nasdaq falling 1.7%. The Global Dow dipped 1.2%, followed by the S&P 500 (-1.1%), the Dow (-1.0%), and the Russell 2000 (-0.9%). Ten-year Treasury yields added 7.0 basis points to reach 3.94%. The dollar jumped 0.6%, while gold prices fell 0.5%. Crude oil prices rose for the second straight day, closing at about $76.58 per barrel.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 2/24	Weekly Change	YTD Change
DJIA	33,147.25	33,826.69	32,816.92	-2.99%	-1.00%
Nasdaq	10,466.48	11,787.27	11,394.94	-3.33%	8.87%
S&P 500	3,839.50	4,079.09	3,970.04	-2.67%	3.40%
Russell 2000	1,761.25	1,946.36	1,890.49	-2.87%	7.34%
Global Dow	3,702.71	3,978.16	3,864.39	-2.86%	4.37%
Fed. Funds target rate	4.25%-4.50%	4.50%-4.75%	4.50%-4.75%	0 bps	25 bps
10-year Treasuries	3.87%	3.82%	3.94%	12 bps	7 bps
US Dollar-DXY	103.48	103.89	105.23	1.29%	1.69%
Crude Oil-CL=F	$80.41	$76.28	$76.58	0.39%	-4.76%
Gold-GC=F	$1,829.70	$1,851.80	$1,818.10	-1.82%	-0.63%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• The second estimate of fourth-quarter gross domestic product showed the economy advanced at an annual rate of 2.7%. In the third quarter, GDP increased 3.2%. The initial estimate showed GDP advanced at a rate of 2.9%. The decrease in the estimates is largely attributable to a decrease in personal consumption expenditures, which advanced 1.4%, according to the second iteration. The initial estimate had personal consumption expenditures increasing 2.1%. Spending on durable goods fell 1.8% from the third quarter, nondurables increased 0.2%, while spending on services rose 2.4%. The increase in GDP in the fourth quarter reflected increases in private inventory investment, consumer spending, nonresidential fixed investment, federal government spending, and state and local government spending that were partly offset by decreases in residential fixed investment and exports. Imports, which are a negative in the calculation of GDP, decreased. The personal consumption expenditures price index, a measure of inflation, increased 3.7% in the fourth quarter, following a 4.3% increase in the third quarter.
• The Personal Consumption Expenditures (PCE) Price Index for January rose 0.6%, in line with other inflation data for that month. Excluding food and energy, the PCE price index also increased 0.6%. The PCE price index was 5.4% above the January 2022 rate, up 0.1 percentage point from the 12-months ended December 2021. Personal consumption expenditures increased 1.8% in January, after falling 0.2% and 0.1% in November and December, respectively. Personal income rose 0.6% in January, while disposable personal income increased 2.0%.
• Sales of existing homes fell for the 12th consecutive month in January, after declining 0.7% from December’s total. Since January 2022, existing home sales are down 36.9%. Total housing inventory sits at a supply of 2.9 months at the current sales pace, unchanged from the December pace. Rising mortgage rates and low inventory have contributed to the decline in existing home sales. According to the data from the National Association of Realtors®, the 30-year fixed-rate mortgage (Freddie Mac) averaged 6.50% as of February 23. That’s up from 6.32% from the previous week and 3.89% from one year ago. The median existing-home price in January was $359,000, down from $366,500 in December, but higher than the January 2022 price of $354,300. Sales of existing single-family homes also declined in January, down 0.8% from the previous month and 36.1% from January 2022. The median existing single-family home price in January was $363,100, lower than the December price of $372,000, but up from the January 2022 price of $360,700.
• While sales of existing homes continued to fall in January, sales of new single-family homes advanced for the second consecutive month, after advancing 7.2% from December. Unsold inventory was at a 7.9-month rate in January, well above the inventory of existing homes. New home prices declined in January. The median price for new single-family homes for sale was $427,500, down from the December price of $465,600, and under the January 2022 price of $430,500. The average price was $474,400, lower than the December price of $544,200, and less than the January 2022 price of $501,200.
• Average regular retail gas prices slid lower throughout much of the United States last week. The national average retail price for regular gasoline was $3.379 per gallon on February 20, $0.011 per gallon less than the prior week’s price and $0.151 less than a year ago. Also, as of February 20, the East Coast price decreased $0.048 to $3.291 per gallon; the Gulf Coast price dipped $0.011 to $3.007 per gallon; the Midwest price fell $0.016 to $3.220 per gallon; the West Coast price increased $0.083 to $4.189 per gallon; and the Rocky Mountain price increased $0.061 to $3.826 per gallon. Residential heating oil prices averaged $4.266 per gallon on February 20, $0.122 below the previous week’s price, but $0.310 per gallon more than a year ago.
• For the week ended February 18, there were 192,000 new claims for unemployment insurance, a decrease of 3,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended February 1 was 1.1%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended February 11 was 1,654,000, a decrease of 37,000 from the previous week’s level, which was revised down by 5,000. States and territories with the highest insured unemployment rates for the week ended February 4 were New Jersey (2.7%), Rhode Island (2.5%), Minnesota (2.4%), California (2.3%), Massachusetts (2.3%), Alaska (2.1%), Montana (2.1%), Illinois (2.0%), Puerto Rico (2.0%), and New York (1.9%). The largest increases in initial claims for unemployment insurance for the week ended February 11 were in Ohio (+1,855), Michigan (+1,350), Massachusetts (+743), Texas (+702), and Minnesota (+683), while the largest decreases were in California (-4,297), Pennsylvania (-2,594), Illinois (-1,956), Kansas (-985), and Iowa (-723).

Eye on the Week Ahead

This week, most of the economic data will focus on the purchasing managers’ assessments of the manufacturing and services sectors in February. January saw both manufacturing and services contract from the previous month, primarily due to a decrease in new orders.

The Markets (as of market close February 17, 2023)

Investors spent much of last week contemplating the impact of the latest inflation data and favorable economic reports. Consumer prices, producer prices, and export prices rose in January, while retail sales also increased, all of which could prompt more interest-rate hikes from the Federal Reserve. In addition, crude oil prices fell more than 4.0% last week as supplies are plentiful, and rising interest rates could stymie economic growth and slow demand for oil. Stocks ended last week mixed, with the Dow and the S&P 500 slipping lower, while the Russell 2000, the Nasdaq, and the Global Dow edged higher. Ten-year Treasury yields rose by 8.0 basis points. The dollar increased against a basket of currencies, while gold prices fell 1.25%.

Last week began on a high note, as stocks finished higher ahead of the upcoming inflation data. Investors also may have sought some bargains following the previous week’s lackluster results. In any case, each of the benchmark indexes listed here posted solid gains, led by the Nasdaq, which rose 1.5%. The Russell 2000 gained 1.2%, followed by the S&P 500 and the Dow at 1.1%, while the Global Dow added 0.7%. Ten-year Treasury yields dipped to 3.71%. Crude oil prices slid 0.6% to $79.26 per barrel. The dollar and gold prices also ended the day lower.

Investors weren’t sure what to make of the latest Consumer Price Index (see below), sending stocks on a topsy turvy ride for most of the day last Tuesday, ultimately closing with mixed results. The Dow (-0.5%) and the Russell 2000 (-0.1%) ended lower, the S&P 500 broke even, while the Nasdaq (0.6%) and the Global Dow (0.2%) finished the day higher. Ten-year Treasury yields climbed higher, reaching 3.76%. Crude oil prices fell for the second straight day, ending at about $79.11 per barrel. The dollar dipped, while gold prices advanced marginally.

A strong retail sales report (see below) helped drive stocks higher last Wednesday. Among the benchmark indexes listed here, the Russell 2000 led the advance, gaining 1.0%, followed by the Nasdaq (0.9%), the S&P 500 (0.3%), and the Dow (0.1%). The Global Dow was flat on the day. Ten-year Treasury yields continued to climb higher, adding 4.8 basis points to close at 3.80%. The dollar rose 0.6%, while gold prices slid nearly 1.0%. Crude oil prices dipped $0.41 to close at about $78.65 per barrel.

Stocks suffered their worst performance in a month last Thursday following a “hot” Producer Price Index (see below), which fueled worries of more interest-rate hikes. The Nasdaq (-1.8%), the S&P 500 (-1.4%), the Dow (-1.3%), and the Russell 2000 (-1.0%) fell by at least 1.0%, while the Global Dow slid 0.2%. Ten-year Treasury yields climbed to 3.84%. The dollar and gold prices advanced. Crude oil prices continued to tumble, falling $0.53 to $78.06 per barrel.

The Dow (0.4%) and the Russell 2000 (0.2%) eked out gains last Friday, while the Nasdaq (-0.6%), the S&P 500 (-0.3%), and the Global Dow (-0.1%) declined. The yield on 10-year Treasuries slipped 1.5 basis points to close the day and the week at 3.82%. Crude oil prices dropped 2.75% to about $76.28 per barrel. The dollar and gold prices moved marginally higher.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 2/17	Weekly Change	YTD Change
DJIA	33,147.25	33,869.27	33,826.69	-0.13%	2.05%
Nasdaq	10,466.48	11,718.12	11,787.27	0.59%	12.62%
S&P 500	3,839.50	4,090.46	4,079.09	-0.28%	6.24%
Russell 2000	1,761.25	1,918.81	1,946.36	1.44%	10.51%
Global Dow	3,702.71	3,959.77	3,978.16	0.46%	7.44%
Fed. Funds target rate	4.25%-4.50%	4.50%-4.75%	4.50%-4.75%	0 bps	25 bps
10-year Treasuries	3.87%	3.74%	3.82%	8 bps	-5 bps
US Dollar-DXY	103.48	103.58	103.89	0.30%	0.40%
Crude Oil-CL=F	$80.41	$79.83	$76.28	-4.45%	-5.14%
Gold-GC=F	$1,829.70	$1,875.20	$1,851.80	-1.25%	1.21%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• The Consumer Price Index rose 0.5% in January after increasing 0.1% in December. Despite the January jump, prices actually declined for the 12 months ended in January, falling 0.1 percentage point to 6.4%. This was the smallest 12-month increase since the period ended October 2021. Housing costs drove inflation higher last month, with shelter prices advancing 0.7%, accounting for nearly half of the overall CPI increase. Prices for food rose 0.5%, while energy prices rebounded, climbing 2.0%. Core prices, less food and energy, rose 0.4% last month and 5.6% for the last 12 months ended in January, the smallest 12-month increase since December 2021. This report, coupled with last month’s robust jobs data, will likely support more interest-rate increases by the Federal Reserve.
• Prices producers received for goods and services were higher than expected in January. The Producer Price Index increased 0.7% last month after falling 0.2% in December. The January increase was the highest since June 2022. The PPI rose 6.0% for the 12 months ended in January. Last month, prices for goods increased 1.2%, while prices for services rose 0.4%. In January, food prices fell 1.0% but are up 11.6% over the last 12 months. Energy prices rebounded from a December swoon (-6.7%), increasing 5.0% in January. Producer prices, less foods, energy, and trade services, rose 0.6% in January, the largest advance since March 2022.
• Retail sales increased 3.0% in January after decreasing 1.1% in December. Retail sales advanced 6.4% from January 2022. Retail trade sales advanced 2.3% last month and 3.9% for the 12 months ended in January. Helping to drive retail sales in January was a 6.4% increase in sales of automobiles and other motor vehicles. Department store sales jumped 17.5% last month, food services and drinking places sales rose 7.2%, while internet sales climbed 1.3%.
• Import prices fell 0.2% in January, following a 0.1% (revised) decline in December. In contrast, export prices rose 0.8% last month after falling 3.2% in December. Despite the recent declines, import prices advanced 0.8% over the past year. The 12-month increase in January was the smallest over-the-year rise since import prices fell 0.3% from December 2019 to December 2020. Import fuel prices dropped 4.9% in January, while nonfuel import prices increased 0.3%. The January increase in export prices was the first monthly advance since June 2022. Agricultural export prices fell 0.2% last month, while nonagricultural export prices increased 0.8%.
• The number of residential building permits issued in January rose 0.1% over December’s total but were 27.3% below the January 2022 rate. Single-family residential building permits issued in January slid 1.8% from the previous month. Last month, housing starts fell 4.5% from the December total and 21.4% under the January 2022 figure. Single-family housing starts in January were 4.3% under the December total. Housing completions rose 1.0% in January from the December rate and 12.8% above the January 2022 figure. Single-family housing completions in January were 4.4% over the December total.
• Industrial production was unchanged in January after falling 0.6% and 1.0% in November and December, respectively. In January, manufacturing output moved up 1.0% and mining output rose 2.0%, following two months with substantial decreases for each sector. Utilities were a drag on industrial production, falling 9.9% in January as unseasonably warm weather in January depressed the demand for heating. Total industrial production in January was 0.8% above its pace from a year earlier.
• Average regular retail gas prices slid lower for the second consecutive week, according to the U.S. Energy Information Administration. The national average retail price for regular gasoline was $3.390 per gallon on February 12, $0.054 per gallon less than the prior week’s price and $0.097 less than a year ago. Also, as of February 13, the East Coast price decreased $0.067 to $3.339 per gallon; the Gulf Coast price dipped $0.074 to $3.018 per gallon; the Midwest price fell $0.061 to $3.236 per gallon; the West Coast price decreased $0.001 to $4.106 per gallon; and the Rocky Mountain price increased $0.071 to $3.765 per gallon. Residential heating oil prices averaged $4.390 per gallon on February 13, $0.073 below the previous week’s price but $0.434 per gallon more than a year ago.
• For the week ended February 11, there were 194,000 new claims for unemployment insurance, a decrease of 1,000 from the previous week’s level, which was revised down by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended February 4 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended February 4 was 1,696,000, an increase of 16,000 from the previous week’s level, which was revised down by 8,000. States and territories with the highest insured unemployment rates for the week ended January 28 were New Jersey (2.6%), Rhode Island (2.5%), California (2.3%), Minnesota (2.3%), Alaska (2.2%), Massachusetts (2.2%), Montana (2.1%), Illinois (2.0%), Puerto Rico (2.0%), Connecticut (1.9%), and New York (1.9%). The largest increases in initial claims for unemployment insurance for the week ended February 4 were in California (+6,820), Ohio (+3,528), Illinois (+1,533), Kansas (+611), and Florida (+568), while the largest decreases were in Georgia (-1,463), New Jersey (-1,291), Texas (-859), Oregon (-692), and Arkansas (-632).

Eye on the Week Ahead

The second estimate of the fourth-quarter gross domestic product is available this week. The initial estimate, based on incomplete data, showed that the economy expanded at a rate of 2.9%. The January figures on sales of new and existing homes are also out this week. Existing home sales plunged 34.0% in 2022, while sales of new, single-family homes fell 26.6%. The report on personal income and outlays for January is released at the end of this week. Consumer spending slipped in December, while prices for goods and services decreased 0.2%, an indication of waning inflationary pressures. Based on the CPI and PPI, it is expected that the personal consumption expenditures price index will show an increase in January.

The Markets (as of market close February 10, 2023)

Stocks dipped lower last week as investors mulled the direction of the economy as the Federal Reserve continued to increase interest rates, bolstered by January’s strong labor report. With fourth-quarter corporate earnings reporting season nearing a close, fewer companies are topping profit expectations, which may be another indication of a slowing economy. Each of the benchmark indexes posted weekly losses, with the S&P 500 turning in its worst weekly performance of the year. The yield on 10-year Treasuries rose 21.0 basis points as bond prices declined. Crude oil prices jumped late last week following Russia’s announcement that it plans to cut oil production by about 5.0% next month in retaliation against Western oil sanctions. The dollar inched higher, while gold prices slipped lower.

Stocks opened last week lower as investors awaited the Federal Reserve’s next move. January’s surging jobs report certainly supported the Fed’s aggressive policy to bring down inflation and could lead to a longer period of interest-rate hikes. By the close of trading last Monday, the Russell 2000 (-1.4%), the Global Dow (-1.0%), and the Nasdaq (-1.0%) led the declining benchmark indexes, followed by the S&P 500 (-0.6%) and the Dow (-0.1%). Ten-year Treasury yields shot up 10.2 basis points to 3.63%. Crude oil prices rose for the first time in several sessions, adding $1.07 to reach $74.46 per barrel. The dollar and gold prices also advanced on the day.

Wall Street saw stocks rebound last Tuesday after Federal Reserve Chair Jerome Powell said that the process of getting inflation down (disinflation) had begun, although it has a long way to go. Investors expected the Federal Reserve to take a hawkish stance on the heels of the latest robust jobs report. By the end of the trading session, each of the benchmark indexes posted solid gains, with the Nasdaq reversing course from the previous day after gaining 1.9%. The S&P 500 added 1.3%, followed by the Dow and the Russell 2000 (0.8%) and the Global Dow (0.7%). Bond prices continued to fall, with the yield on 10-year Treasuries adding 4.0 basis points to 3.67%. Crude oil prices increased for the second straight day, climbing to $77.31 per barrel. The dollar slipped lower, while gold prices rose marginally higher.

Stocks were unable to maintain the previous day’s rally, as each of the benchmark indexes listed here lost value last Wednesday. The volatile Nasdaq declined 1.7%, the Russell 2000 dropped 1.5%, the S&P 500 slid 1.1%, the Dow fell 0.6%, and the Global Dow decreased 0.2%. Ten-year Treasury yields closed at 3.65% after falling 2.1 basis points. Crude oil prices continued to rally, increasing 1.6% to reach $78.40 per barrel. The dollar and gold prices advanced.

Last Thursday saw stocks fall for the second straight session amid mixed corporate earnings data. The Russell 2000 (-1.3%) and the Nasdaq (-1.0%) led the declining benchmark indexes, followed by the S&P 500 (-0.9%), the Dow (-0.7%), and the Global Dow (-0.2%). Ten-year Treasury yields added 3.0 basis points to close at 3.68%. Crude oil ended a modest rally, falling 1.1% to $77.62 per barrel. The dollar and gold prices slid lower.

Stocks ended the week mixed last Friday, with the Nasdaq and the Global Dow trending lower, while the Dow, the S&P 500, and the Russell 2000 advanced. Ten-year Treasury yields rose 6.1 basis points to 3.74%. Crude oil prices advanced $1.74 to $79.83 per barrel. the dollar advanced, while gold prices slid lower.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 2/10	Weekly Change	YTD Change
DJIA	33,147.25	33,926.01	33,869.27	-0.17%	2.18%
Nasdaq	10,466.48	12,006.96	11,718.12	-2.41%	11.96%
S&P 500	3,839.50	4,136.48	4,090.46	-1.11%	6.54%
Russell 2000	1,761.25	1,985.53	1,918.81	-3.36%	8.95%
Global Dow	3,702.71	3,990.44	3,959.77	-0.77%	6.94%
Fed. Funds target rate	4.25%-4.50%	4.50%-4.75%	4.50%-4.75%	0 bps	25 bps
10-year Treasuries	3.87%	3.53%	3.74%	21 bps	-13 bps
US Dollar-DXY	103.48	102.96	103.58	0.60%	0.10%
Crude Oil-CL=F	$80.41	$73.24	$79.83	9.00%	-0.72%
Gold-GC=F	$1,829.70	$1,878.90	$1,875.20	-0.20%	2.49%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• The monthly report on the international trade in goods and services deficit, released February 7, is for December and shows that the goods and services trade deficit was $67.4 billion, up $6.4 billion from the November trade deficit. December exports were $250.2 billion, $2.2 billion less than November exports. December imports were $317.6 billion, $4.2 billion more than November imports. For 2022, the goods and services trade deficit increased $103.0 billion, or 12.2%, from 2021. Exports increased $453.1 billion, or 17.7%. Imports increased $556.1 billion, or 16.3%.
• The Treasury budget deficit was $38.8 billion in January, down from December’s $85.0 billion, but well above the January 2022 surplus of $118.7 billion. Through the first four months of fiscal year 2023, the deficit sits at $460.2 billion, $201.2 billion higher than the deficit over the same period last fiscal year.
• Average regular retail gas prices slid lower last week, according to the U.S. Energy Information Administration. The national average retail price for regular gasoline was $3.444 per gallon on February 6, $0.045 per gallon less than the prior week’s price and unchanged from a year ago. Also, as of February 6, the East Coast price decreased $0.060 to $3.406 per gallon; the Gulf Coast price dipped $0.041 to $3.092 per gallon; the Midwest price fell $0.085 to $3.297 per gallon; the West Coast price increased $0.022 to $4.107 per gallon; and the Rocky Mountain price advanced $0.150 to $3.694 per gallon. Residential heating oil prices averaged $4.465 per gallon on February 6, $0.192 below the previous week’s price but $0.547 per gallon more than a year ago.
• For the week ended February 4, there were 196,000 new claims for unemployment insurance, an increase of 13,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended January 28 was 1.2%, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended January 28 was 1,688,000, an increase of 38,000 from the previous week’s level, which was revised down by 5,000. States and territories with the highest insured unemployment rates for the week ended January 21 were New Jersey (2.6%), Rhode Island (2.4%), California (2.3%), Alaska (2.2%), Minnesota (2.2%), Massachusetts (2.1%), Puerto Rico (2.0%), Montana (2.0%), Illinois (1.9%), and New York (1.9%). The largest increases in initial claims for unemployment insurance for the week ended January 28 were in Georgia (+2,070), New York (+949), New Jersey (+847), Oregon (+801), and Wisconsin (+569), while the largest decreases were in Kentucky (-3,402), California (-2,551), Ohio (-1,105), Arkansas (-568), and Michigan (-359).

Eye on the Week Ahead

The latest inflation data is available this week with the release of the consumer price index, the producer price index, and the report on import and export prices. Inflationary pressures appear to have peaked. This latest information could show prices beginning to slide, which reinforces the effectiveness of the Fed’s aggressive interest-rate hike policy.

The Markets (as of market close February 3, 2023)

Just when investors saw a glimmer of hope that the Fed would soften its rate-hike policy, the January labor figures came out showing a massive job increase coupled with moderated wage growth. The latest employment data is evidence of a labor market that has withstood the Fed’s actions thus far and could encourage a more aggressive response by the central bank as it attempts to drive down inflation. Despite a late-week slide, stocks ended the week mixed, with the Nasdaq, the Russell 2000, and the S&P 500 posting gains, while the Dow, and the Global Dow lost ground. Ten-year Treasury yields inched higher and the dollar advanced. Gold prices, which had been on an upswing, fell to under $1,900.00 per ounce. Doubts about increased demand from China and concerns about rising interest rates sent crude oil prices lower last week.

Investors turned cautious last Monday ahead of the Federal Reserve’s meeting and a slew of big-tech earnings reports. The Nasdaq suffered its worst day since December 22, falling 2.0%, while the S&P 500 lost 1.3%, marking its worst daily performance since mid-January. Declines in a couple of mega-cap tech stocks dragged both indexes lower. The remaining benchmark indexes listed here didn’t fare much better. The Russell 2000 slid 1.4%, while the Global Dow and the Dow dipped 0.8%. Ten-year Treasury yields added 3.3 basis points to reach 3.55%. Crude oil declined nearly $2.00 to $77.78 per barrel. The dollar advanced against a basket of currencies. Gold prices fell 0.4% to $1,938.70 per ounce.

Stocks closed January on an uptick, with each of the benchmark indexes listed here posting solid gains. The Russell 2000 jumped 2.5% by the close of trading, followed by the Nasdaq (1.7%), the S&P 500 (1.5%), the Dow (1.1%), and the Global Dow (0.4%). Treasury yields on 10-year notes slipped 2.2 basis points to close at 3.52%. Crude oil prices rose 1.6%, reaching $79.12 per barrel. The dollar fell, while gold prices advanced.

Last Wednesday saw stocks climb higher after the Federal Reserve scaled back its interest-rate hikes (see below) and indicated that inflation may be slowing. The Nasdaq jumped 2.0%, well ahead of the other benchmark indexes listed here. The Russell 2000 gained 1.5%, the S&P 500 advanced 1.1%, the Global Dow added 0.9%, and the Dow ended the day flat. Bond prices climbed higher, with the yield on 10-year Treasuries falling 13.2 basis points to 3.39%. Crude oil prices slid 2.5%, landing at $76.94 per barrel. The dollar declined, while gold prices increased 1.2% to $1,967.70 per ounce.

Stocks continued to rally last Thursday, as investors clung to hopes that the Fed is on track to loosen its fiscal tightening policy. Both the Nasdaq and the S&P 500 have enjoyed the best three-session rally since November. The Nasdaq gained 3.3%, the Russell 2000 climbed 2.1%, the S&P 500 advanced 1.5%, and the Global Dow increased 0.3%. Only the Dow failed to advance, dipping 0.1%. Ten-year Treasury yields were flat by the end of Thursday’s session. Crude oil prices fell for the second straight day, declining to $76.00 per barrel. The dollar rose, while gold prices fell nearly 1.0%.

A robust jobs report sent stocks reeling last Friday, with each of the benchmark indexes listed here closing the session in the red. The Nasdaq lost 1.6%, followed by the S&P 500 and the Global Dow, which fell 1.0%. The Russell 2000 declined 0.9% and the Dow dipped 0.4%. Ten-year Treasury yields added 13.6 basis points to hit 3.53%. Crude oil prices continued to slip, falling to $73.24 per barrel. The dollar rose 1.2%, while gold prices slid 2.7%.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 2/3	Weekly Change	YTD Change
DJIA	33,147.25	33,978.08	33,926.01	-0.15%	2.35%
Nasdaq	10,466.48	11,621.71	12,006.96	3.31%	14.72%
S&P 500	3,839.50	4,070.56	4,136.48	1.62%	7.73%
Russell 2000	1,761.25	1,911.46	1,985.53	3.88%	12.73%
Global Dow	3,702.71	4,004.70	3,990.44	-0.36%	7.77%
Fed. Funds target rate	4.25%-4.50%	4.25%-4.50%	4.50%-4.75%	25 bps	25 bps
10-year Treasuries	3.87%	3.51%	3.53%	2 bps	-34 bps
US Dollar-DXY	103.48	101.92	102.96	1.02%	-0.50%
Crude Oil-CL=F	$80.41	$79.46	$73.24	-7.83%	-8.92%
Gold-GC=F	$1,829.70	$1,928.20	$1,878.90	-2.56%	2.69%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• Following its meeting last week, the Federal Open Market Committee voted to increase the target range for the federal funds rate 25 basis points to 4.50%-4.75%. In support of its decision, the Committee pointed to modest growth in spending and production, robust job gains, and a low unemployment rate, while noting that inflation had eased somewhat but remained elevated. The FOMC anticipates more interest-rate increases in the future until it feels that inflation has returned to the Committee’s goal of 2.0% over time. However, the FOMC indicated that it would continue to assess economic information in determining whether to adjust its current monetary policy. In addition, following its meeting, Federal Reserve Chair Jerome Powell said, “we can now say for the first time that the disinflationary process has started.”
• Employment rose by a whopping 517,000 new jobs in January, according to the latest report from the Bureau of Labor Statistics. January’s job gains exceeded the 2022 average monthly gain of 401,000. Job growth was widespread in January, led by gains in leisure and hospitality, professional and business services, and health care. Employment also increased in government, partially reflecting the return of workers from a strike. Both the unemployment rate, at 3.4%, and the number of unemployed persons, at 5.7 million, changed little in January. The unemployment rate has shown little net movement since early 2022. In January, both the labor force participation rate, at 62.4%, and the employment-population ratio, at 60.2%, were unchanged. In January, average hourly earnings rose by $0.10, or 0.3%, to $33.03. Over the past 12 months, average hourly earnings have increased by 4.4%, down from 4.9% for the 12 months ended in December. The average workweek rose by 0.3 hour to 34.7 hours.
• The Job Openings and Labor Turnover Summary for December, released February 1, 2023, revealed that the number of job openings rose to 11.0 million, up from the November total of 10.4 million. The number of job openings in December is the highest monthly total since July. In December, the largest increases in job openings were in accommodation and food services (+409,000), retail trade (+134,000), and construction (+82,000). The number of job openings decreased in information (-107,000). December saw hires increase by 131,000 to 6.2 million, while total separations increased 59,000 to 5.9 million.
• Manufacturing continued to decline in January, according to the latest release of the S&P Global US Manufacturing PMI™. Purchasing manager survey respondents noted a sharp contraction in new orders, while input and output costs increased as price pressures strengthened. Job growth slowed as new orders waned and backlogs declined. Overall, the purchasing managers’ index posted 46.9 in January, marginally higher than the December reading of 46.2.
• The services sector followed manufacturing, falling sharply in January, according to the S&P Global US Services PMI™. Like manufacturing, weak domestic and foreign demand led to declines in new business and new export orders. At the same time, cost inflation picked up for the first time in eight months.
• Regular retail gas prices continued to rise across the country last week, according to the U.S. Energy Information Administration. The national average retail price for regular gasoline was $3.489 per gallon on January 30, $0.074 per gallon above the prior week’s price and $0.121 higher than a year ago. Also, as of January 30, the East Coast price increased $0.082 to $3.466 per gallon; the Gulf Coast price dipped $0.041 to $3.133 per gallon; the Midwest price climbed $0.078 to $3.382 per gallon; the West Coast price increased $0.077 to $4.085 per gallon; and the Rocky Mountain price advanced $0.110 to $3.544 per gallon. Residential heating oil prices averaged $4.657 per gallon on January 30, $0.044 below the previous week’s price but $0.881 per gallon more than a year ago.
• For the week ended January 28, there were 183,000 new claims for unemployment insurance, a decrease of 3,000 from the previous week’s level. This is the lowest number of initial claims since April 2022 and the fifth straight week of declines. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended January 21 was 1.1%, unchanged from the previous week’s rate, which was revised down by 0.1 percentage point. The advance number of those receiving unemployment insurance benefits during the week ended January 21 was 1,655,000, a decrease of 11,000 from the previous week’s level, which was revised down by 9,000. States and territories with the highest insured unemployment rates for the week ended January 14 were New Jersey (2.5%), Rhode Island (2.4%), Alaska (2.3%), Minnesota (2.2%), California (2.1%), Massachusetts (2.1%), Puerto Rico (2.1%), Montana (2.0%), Illinois (2.0%), and New York (1.9%). The largest increases in initial claims for unemployment insurance for the week ended January 21 were in Arkansas (+419) and the Virgin Islands (+5), while the largest decreases were in California (-175,582), New York (-4,957), Ohio (-4,396), Georgia (-3,921), and Pennsylvania (-2,700).

Eye on the Week Ahead

There isn’t much in terms of economic reports issued this week. The goods and services trade deficit report for December is out this week. The trade deficit narrowed sharply in November, falling $6.3 billion from the previous month. A notable drop in imports led to the lowest monthly trade deficit since July 2020. The Treasury budget rose more than $63.0 billion in December from a year ago. For the first three months of the fiscal year, the deficit sat at $421.4 billion, up from $377.7 billion over the same period in the previous fiscal year.

The Markets (as of market close January 31, 2023)

January proved to be a bumpy ride for investors, with stocks ultimately ending higher to begin the new year, despite concerns that the economy may be headed toward a significant slowdown or even a recession. Nevertheless, each of the benchmark indexes listed here posted solid gains in January, led by the Nasdaq as tech stocks rebounded from a rough 2022. Stocks began the month by climbing higher over the first two weeks of January. However, equities lagged mid-month, only to rebound at the end of January, closing out the month on a positive note.

Several market sectors posted solid gains in January. Consumer discretionary and communication services increased by about 14.0%. Real estate, materials, and information technology gained about 9.0%. On the other hand, health care, utilities, and consumer staples lost ground.

Recent economic data indicated that inflation may have peaked. The consumer price index and the personal consumption expenditures price index for December revealed a drop in the annual rate of price increases. However, the Federal Reserve and most central banks continued to stress further tightening. It is expected the Federal Open Market Committee will hike interest rates 25 basis points following its meeting on February 1. Wall Street remained hopeful that the economy can weather more interest-rate hikes. Fourth-quarter gross domestic product increased 2.9%, a slower pace of growth than in the third quarter. For 2022, GDP increased 2.1%. Several of the world’s leading economic indicators slowed in the second half of 2022, curtailing momentum leading into 2023.

Manufacturing activity decelerated, with industrial production falling over the past several months. Durable goods orders rose in December, driven largely by a jump in transportation. Excluding transportation, durable goods orders decreased 0.1%. The purchasing managers’ index declined as output levels fell amid weak customer demand. High interest rates and economic uncertainty led to reduced customer spending.

Fourth-quarter corporate earnings were generally favorable, however not as strong as the same period last year. Of the roughly 100 S&P companies that have reported Q4 results, total earnings are down about 6.0% compared to a year ago and are expected by be down 7.2% overall.

Bond prices rose in January, pulling yields lower. Ten-year Treasury yields fell 32 basis points. The Treasury yield curve is currently inverted, with the yield on the one-month bond at about 4.53%, while the 10-year bond yield sits at 3.52%. An inverted yield curve is often seen as an indicator of economic weakness. The dollar slid lower against a basket of world currencies. Gold prices rose nearly $114.00 per ounce in January, advancing for the second consecutive month.

Crude oil prices declined in January for the third straight month. Prices for U.S. and global crude oil notched their largest monthly decreases since November 2022. Oil prices were volatile in January, opening the month lower, but rising on optimism of China’s increased demand. However, prices slipped lower toward the end of January as overall demand appeared to wane. The retail price of regular gasoline was $3.489 per gallon on January 30, $0.398 more than December’s price, and $0.121 higher than a year ago.

Stock Market Indexes

Market/Index	2022 Close	Prior Month	As of January 31	Monthly Change	YTD Change
DJIA	33,147.25	33,147.25	34,086.04	2.83%	2.83%
Nasdaq	10,466.48	10,466.48	11,584.55	10.68%	10.68%
S&P 500	3,839.50	3,839.50	4,076.60	6.18%	6.18%
Russell 2000	1,761.25	1,761.25	1,931.94	9.69%	9.69%
Global Dow	3,702.71	3,702.71	3,990.37	7.77%	7.77%
Fed. Funds target rate	4.25%-4.50%	4.25%-4.50%	4.25%-4.50%	0 bps	0 bps
10-year Treasuries	3.87%	3.87%	3.52%	-35 bps	-35 bps
US Dollar-DXY	103.48	103.48	102.08	-1.35%	-1.35%
Crude Oil-CL=F	$80.41	$80.41	$79.08	-1.65%	-1.65%
Gold-GC=F	$1,829.70	$1,829.70	$1,944.00	6.25%	6.25%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.

Latest Economic Reports

• Employment: Job growth remained strong in December with the addition of 233,000 new jobs following a net downward revision of 28,000 in the prior two months. Despite federal interest-rate hikes aimed at slowing the economy and inflation, there is little evidence that the supply of labor is peaking. Overall, employment rose by 4.5 million in 2022 (an average monthly gain of 375,000), less than the increase of 6.7 million in 2021 (an average monthly gain of 562,000). In December, notable job gains occurred in leisure and hospitality, health care, construction, and social assistance. The unemployment rate edged down 0.1 percentage point to 3.5%. The number of unemployed persons decreased 278,000 to 5.7 million in December. The employment-population ratio increased by 0.2 percentage point over the month to 60.1%. The labor force participation rate was little changed at 62.3%. Both measures have shown little net change since early 2022. In December, average hourly earnings increased by $0.09, or 0.3%, to $32.82. Over the past 12 months ended in December, average hourly earnings rose by 4.6%. The average workweek decreased by 0.1 hour to 34.3 hours in December, down from 34.4 hours in November.
• There were 186,000 initial claims for unemployment insurance for the week ended January 21, 2023. The total number of workers receiving unemployment insurance was 1,675,000. By comparison, over the same period last year, there were 222,000 initial claims for unemployment insurance, and the total number of claims paid was 1,787,000.
• FOMC/interest rates: The Federal Open Market Committee met on the last two days of January, however the results of that meeting will not be released until the end of the first day of February, after this report has been released. The results of that meeting will be detailed in the next weekly report and in the February monthly report.

• GDP/budget: The economy, as measured by gross domestic product, accelerated at an annual rate of 2.9% in the fourth quarter of 2022, according to the initial, or advance, estimate. GDP increased 3.2% in the third quarter after falling in the first and second quarters, 1.6% and 0.6%, respectively. Consumer spending, as measured by the personal consumption expenditures index, rose 2.1% in the fourth quarter compared to an increase of 2.3% in the third quarter. Spending on services rose 2.6% in the fourth quarter compared with a 3.7% increase in the third quarter. Consumer spending on goods actually increased 1.1% in the fourth quarter after decreasing 0.4% in the third quarter. Fixed investment fell 6.7% in the fourth quarter (-3.5% in the third quarter), pulled lower by a 26.7% drop in residential fixed investment. Nonresidential (business) fixed investment rose 0.7% in the fourth quarter. Exports fell 1.3% in the fourth quarter, compared with a 14.6% increase in the previous quarter. Imports, which are a negative in the calculation of GDP, fell 4.6% in the fourth quarter, following a 7.3% decline in the third quarter. Consumer prices increased 3.2% in the fourth quarter (4.3% in the third quarter). Excluding food and energy, consumer prices advanced 3.9% in the fourth quarter (4.7% in the third quarter). In 2022, GDP increased 2.1%, compared with an increase of 5.9% in 2021. The PCE price index increased 6.2%, compared with an increase of 4.0% in 2021. Excluding food and energy prices, the PCE price index increased 5.0%, compared with an increase of 3.5% in 2021.
• December saw the federal budget deficit come in at $85.0 billion, $163.5 billion less than the November deficit but $62.7 billion above the December 2021 deficit. The deficit for the first three months of fiscal year 2023, at $421.4 billion, is $43.7 billion more than the first three months of the previous fiscal year. In December, government receipts totaled $454.9 billion and $1,025.6 trillion for the current fiscal year. Government outlays were $539.9 billion in December and $1,447.0 trillion through the first three months of fiscal year 2023. By comparison, receipts in December 2021 were $486.7 billion and $1,051.9 trillion through the first three months of the last fiscal year. Expenditures were $508.0 billion in December 2021 and $1,429.6 trillion for the year.

• Inflation/consumer spending: Data from December shows that the peak of rising inflation may be behind us. According to the latest Personal Income and Outlays report, personal income rose 0.2% and disposable personal income rose 0.3% in December after each increased 0.3% in November. Consumer spending fell 0.2% in December after declining 0.1% the previous month. Consumer prices inched up 0.1% in December, the same advance as in November. Excluding food and energy, consumer prices increased 0.3% in December. Consumer prices have risen 5.0% since December 2021, 0.5 percentage point less than the 12-month period ended in November 2021.
• The Consumer Price Index dipped 0.1% in December after inching up 0.1% in November. Over the 12 months ended in December, the CPI rose 6.5%, down from 7.1% in November, falling to its lowest 12-month advance since October 2021. Excluding food and energy prices, the CPI rose 0.3% in December and 5.7% for the year ended in December. Although energy prices fell 4.5% in December, food prices rose 0.3% and prices for shelter increased 0.8%. For the 12 months ended in December, energy prices increased 7.3%, while food prices rose 10.4%.
• Prices that producers receive for goods and services dropped 0.5% in December after rising 0.2% in November. Producer prices increased 6.2% for the 12 months ended in December after rising 10.0% in 2021. In December, the decrease in the PPI index can be attributed to a 1.6% decline in prices for goods. In contrast, prices for services rose 0.1%. Producer prices less foods, energy, and trade services rose 0.1% in December after increasing 0.3% in the previous month. Prices less foods, energy, and trade services advanced 4.6% in 2022, following a 7.0% rise in 2021.
• Housing: Sales of existing homes decreased for the eleventh consecutive month after declining 1.5% in December. Existing home sales dropped 34.0% from December 2021. Limited inventory and rising mortgage rates contributed to the decrease in existing-home sales. The median existing-home price was $366,900 in December, lower than the November price of $372,000 but 2.3% higher than the December 2021 price of $358,800. Unsold inventory of existing homes represents a 2.9-month supply at the current sales pace, down from the November pace of 3.3 months but higher than the 1.7-month supply in December 2021. Sales of existing single-family homes dropped 1.1% in December and 33.5% from December 2021. The median existing single-family home price was $372,700 in December, down from $378,700 in November but higher than the December 2021 price of $365,300.
• New single-family home sales advanced in December, climbing 2.3% and marking the second consecutive monthly increase. However, sales are down 26.6% from December 2021. An estimated 644,000 new homes were sold in 2022, 16.4% below the 2021 figure of 771,000. The median sales price of new single-family houses sold in December was $462,100 ($459,000 in November). The December average sales price was $528,400 ($528,600 in November). The inventory of new single-family homes for sale in December represented a supply of 9.0 months at the current sales pace, down marginally from the November estimate of 9.2 months.

• Manufacturing: Industrial production declined 0.7% in December, following a 0.6% decrease in November. Industrial production has not increased since July 2022. Manufacturing decreased 1.3% in December (-1.1% in November), mining fell 0.9%, while utilities rose 3.8%. Over the 12 months ended in December, total industrial production was 1.6% above its year-earlier reading.
• December saw new orders for durable goods increase 5.6%, after decreasing 1.7% in November. Durable goods orders advanced four out of five months with the December advance. Excluding transportation, new orders increased 0.2% in December. Excluding transportation, new orders decreased 0.1%. Excluding defense, new orders increased 6.3%. Transportation equipment, also up four of the last five months, contributed to the December increase, rising 16.7%. Also of note, new orders for nondefense aircraft and parts jumped 115.5% in December after falling 30.7% the previous month. New orders for nondefense capital goods increased 19.2% in December, while new orders for defense capital goods slid 2.8%.

• Imports and exports: December saw import prices climb 0.4%, the first monthly increase since June 2022. Prices for U.S. imports rose 3.5% over the past year, driven by higher fuel and nonfuel prices. Import fuel prices increased 0.6% in December, the first monthly increase since June 2022. Nonfuel import prices climbed 0.4% in December, the first monthly increase since April 2022. Nonfuel import prices rose 1.9% in 2022, the smallest annual advance since 2020. Export prices declined 0.3% in November and have not recorded a 1-month increase since rising 1.1% in June 2022. Prices for exports fell 2.6% in December after falling 0.4% in November. Export prices have not increased on a monthly basis since a 1.1% advance in June 2022. Exports rose 5.0% over the past 12 months, the smallest over-the-year advance since a 2.5% increase in January 2021.
• The international trade in goods deficit was $90.3 billion in December, up $7.3 billion, or 8.8%, from November. Exports of goods for December were $166.8 billion, $2.6 billion, or 1.6%, less than November exports. Imports of goods were $257.1 billion in December, $4.7 billion, or 1.9%, more than in November. The December drop in exports was largely attributable to a 1.7% decline in consumer goods and a 5.1% decrease in industrial supplies. In December, auto imports were up 9.4%, while imports of consumer goods rose 6.6%.
• The latest information on international trade in goods and services, released January 5, is for November and shows that the goods and services trade deficit was $61.5 billion, a decrease of $16.3 billion (-21.0%) from the October deficit. November exports were $251.9 billion, $5.1 billion, or 2.0%, less than October exports. November imports were $313.4 billion, $21.5 billion, or 6.4%, less than October imports. Year to date, the goods and services deficit increased $120.1 billion, or 15.7%, from the same period in 2021. Exports increased $439.4 billion, or 18.9%. Imports increased $559.5 billion, or 18.1%.
• International markets: China’s zero-COVID policy, in place for much of 2022, slowed that country’s economy, which grew by just 3.0% in 2022, far below the official target. However, the Chinese government’s abrupt end to that policy at the end of 2022 raised hope for 2023. Inflation may have reached its peak, but most central banks aren’t ready to end interest-rate hikes — with the exception of Canada. The Bank of Canada indicated it will likely hold off on any further interest rate increases following the last 25-basis point rate hike, which sent interest rates up to a 15-year high of 4.5%. Conversely, the European Central Bank has maintained that inflation remains too high and will continue to raise interest rates. Eurozone inflation reached 9.2% in December 2022. Manufacturing has slowed in many countries. Germany’s purchasing managers’ index slowed to 47.1 (a reading under 50.0 indicates retraction), Japan’s PMI was 48.9, the United Kingdom’s PMI fell to 45.3, while the Eurozone’s PMI dipped to 47.8. For January, the STOXX Europe 600 Index added 4.1%; the United Kingdom’s FTSE advanced 2.6%; Japan’s Nikkei 225 Index gained 4.7%; and China’s Shanghai Composite Index rose 4.5%.
• Consumer confidence: The Conference Board Consumer Confidence Index® decreased in January, following an upwardly revised increase in December 2022. The index stands at 107.1, down from 109.0 in December. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, rose to 150.9 in January, up from 147.4 in the previous month. The Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — fell to 77.8 in January, down from 83.4 in December. According to the Conference Board’s report, an Expectations Index reading below 80.0 could signal a recession within the next year.

Eye on the Month Ahead

Inflationary pressures showed regression in January, which could prompt the Federal Reserve to scale back interest-rate hikes beginning on the first of February, following the Committee’s next meeting. As inflation waned, so did the economy. Close attention will be paid to the labor report and other inflation data, including the consumer price index and the personal consumption expenditures price index. The world economy will get a boost if China remains open to trade, despite growing COVID cases.