Weekly Market Update: January 9, 2023

Market Data as of Week Ending: 1/6/2023 unless noted otherwise

U.S. stock prices regained their footing as most major indexes ended in positive territory for the first week of the year. Stocks responded favorably to economic reports that support a less restrictive stance from the Federal Reserve. Value stocks outperformed their growth oriented counterparts and mid-sized companies outshined both their larger and smaller sized peers. Most of the major economic sectors were up for the week with health care as the only exception, ending the week with a modest loss. Analyst expectations have been lowered over the past several weeks as the consensus estimate for fourth quarter earnings growth has been reduced to -4.1%. Developed foreign and emerging markets stocks ended the week with solid gains as both markets finished ahead of domestic equities.

Intermediate and long-term U.S. Treasury yields dropped sharply on Friday as the 10-year ended the week more than 0.30% lower at 3.63%. The front-end of the yield curve was effectively unchanged as the 2-year finished around where it started the year at 4.70%. Returns were positive across the quality and duration spectrum as long duration government bonds were the best performing segment. Yields moved lower for both investment grade corporate and high yield bonds, ending the week at 5.2% and just below 8.5%, respectively.

Economic data were generally mixed with investors focused on employment reports and Fed minutes. Job openings were essentially unchanged in November ending the month at 10.5 million and unemployment slowed to 3.5% in December. Hiring and wage gains are starting to decelerate which should support a reduction in the pace of rate increases from the Fed. Minutes from the Federal Reserve meeting in December show that committee members are concerned about easing in financial conditions absent a significant reduction in inflation. Services PMI data from both ISM and S&P point toward contractionary territory as new orders fell again in December. Manufacturing PMI data is also below the 50 level with weaker demand and slower output. In Europe, inflation fell below 10% for the first time in two months as lower energy prices brought the figure down to a 9.2% annual increase.

See it by the numbers.

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