Marching Higher into April?
Once again, the S&P 500 rallied again last week even though trouble in the European banking sector resurfaced in the name of Deutsche Bank. Last week all major US indexes gained with the S&P 500 up another +1.4%, the DJIA +1.2%, and the tech heavy NASDAQ Composite leading the way once again up + 1.7%.
The smaller cap Russell 2000 continued to be dragged lower by regional bank stocks. Leading domestic stock gains last week were the same year to date winners, communication services, technology, and large cap stocks. Year to date laggards continued in the same sectors, in banks and utilities. Gold soared toward $2,000/oz for the first time in a year as investors sought safe-haven assets. Gold now sits just 4% from an all-time high.
This morning, interest rates are higher, from 16 basis points for 2 years to 5 basis points for 30 years. European stocks are all green this Monday, led by the FTSE +1.4%, the German DAX +1.3% and the French CAC 40 +1.1%. Asian stocks are mixed today, with the HS China Enterprises Index -2.2%, China CSI 300 -0.4%, while the Japan Nikkei up +0.3%.
Mid last week, our Federal Reserve raised interest rates by 25 bps, largely as expected, but it was not a simple move given the recent uncertainty in the banking sector. The Fed’s statement said that “the Committee anticipates that some additional policy firming may be appropriate”.
This was a dovish shift from their previous guidance of “ongoing increases” in prior statements. Powell said that, yes, they are pretty much done tightening, and if they do more from here, it won’t be by much. Tightening credit conditions created by issues in the banking sector are doing some of the Fed’s forward tightening for them.
The S&P 500 ended last Friday’s at 3,971, up from the previous Friday’s closing level of 3,916. The index is now up +3.4% for the year and back to flat for the month of March.
Communication services led last week’s gains, up +3.4%, followed by a +2.3% rebound in previously weak energy group, a +2.1% rise in materials and a + 2.0% increase in technology. Only two sectors were lower on the week; real estate down -1.4% and utilities off -1.2%. Gains in the communication services sector were led by Facebook parent Meta Platforms (META), rising +5.3% last week. In the energy sector, shares of Pioneer Natural Resources (PXD) rose +5.6% on sell-side analyst upgrades.
The OHFG YouTube channel is currently undergoing some placement modifications. For now, “Stock Talk” can be found by clicking on this link and subscribing to its own content. https://www.youtube.com/@OakHarvestStockTalk. Alternatively, you can type “Stock Talk with Chris” in the You Tube search box, and you should be directed to the new content. The investment content will be a “sub-channel” under our current OHFG channel. Please subscribe if you are interested.
Previously Released YouTube video in 4q22 on the Federal Reserves Balance Sheet and Commercial Banking losses: Federal Reserve Balance Sheet, Commercial Banking, and my Nightmares.
https://www.youtube.com/watch?v=4EVGMniJQDk&list=PLxj0FBH5Bt8twiZx9RvxpW9AydohZ5W3-&index=32&t=355s
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