Equities were mixed and bonds were down as the Fed plastered the market with hawkish speeches last week.
The fourth quarter earnings season is beginning to wind down and things are improving. So far, 82% of S&P 500 companies have reported earnings with 68% having out-paced estimates (just below the 5-year average of 69%). On the revenue front, 65% of companies have exceeded estimates (below the 5-year average of 69%). The economic data has proven solid, which is why the Fed is continuing to be hawkish. Both the Chicago Fed (ANCFI) and St. Louis Fed (Financial Stress) measures of economic conditions have shown improvement over the last 7 consecutive weeks.
Last week, both CPI and PPI inflation data disappointed expectations. However, despite the less-than-expected drop, both CPI and PPI declined for the 7th consecutive month, on a year-over-year basis.
In past inflationary declining periods, the key economic measure did not achieve a straight-line drop from peak to trough. Meanwhile, Retail Sales data came in hotter-than-expected, meaning that the consumer is alive and well. The Fed knows this and is seeking to keep equities under control instead of combating inflation. This week, we’ll learn more about the state of the consumer. If the Fed’s favorite inflation barometer, PCE Prices, show a 4th consecutive drop, Fed speakers will pump up the hawkish volume.
Disclosures
The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.
Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
Past Performance does not guarantee future results.