Market Overview Week of December 5
- Tommaso Sini
- Dec 9, 2022
- 5 min read
Updated: Jun 12, 2023
Market Synopsis: Equities down, Treasury Yields higher, Commodities down, Dollar up, Crypto up
Past Week Event(s):
- The Producer Price Index or PPI was released this week. This data serves as a measure of the change in prices from producers. This is an important indicator and measure of inflation, because producers raise prices in order to keep up with inflation. The report showed a 0.3 percent increase in November which was higher than expected. This runs contrary to the belief that inflation may be cooling.
- This week on Thursday investors got insight into the jobs market. The reports detail initial and existing unemployment claims, basically those who are requesting unemployment benefits and those who are unemployed and continuing to receive benefits. Jobless claims rose to 230,000. This was a relief to many as this may indicate a slow down in the jobs market which in turn might translate to a slow in inflation.
- UMich consumer sentiment index is a survey that asks how people feel about their financial situation, their spending habits, and about the economy in general. This illustrates how inflation has been affecting consumers. The report coming out on Friday indicated an increase in consumer sentiment which beat expectations.
Next Week (December 5):
- Next week's Federal Funds Rate Announcement will be crucial to understanding where inflation and interest rates are headed. The federal funds rate is the rate in which banks charge each other overnight for borrowing capital. The Federal Reserve is a main contributor to maintaining the levels of inflation, and they use the Federal Funds Rate as a vehicle to do so. Currently interest rates are very high which is understood by recent efforts to stop inflation, this announcement will give investors an idea on where the Federal Reserve’s head is at with inflation.
- Consumer Price Index is an important data point to understand inflation. This in hand with the Federal Funds Rate will give investors information on where American inflation is headed.
Market Snapshot:
- Markets had a relatively quiet week with little catalyst or major headlines. Equities or stocks drifted lower on the week while crypto had a great week as Bitcoin climbed back over 17,000. Oil tumbled to 1 year lows as fund managers who are long oil has fallen greatly. The two important macro points that were made this week were PPI and Jobs. It appears based on the report that the jobs market is slowing down slightly as the number of jobless claims rose to 230,000. PPI came out with news that told a different story as it came in above expectations at 0.3 percent which stirred fears of unrelenting inflation. Next week will be critically important as CPI or the consumer price index will tell a great deal of where inflation is heading.
U.S Equities:
- Indexes(Week)
- SPX 3,934.38(-3.37%), DJIA 33,476.46(-2.77%),
- NASDAQ 11,004.62(-3.99%), RUT 1,796.66(-5.08%)
Sectors
- Every sector was in the red this week, understandably so as markets as a whole were down. Utilities were the best performing on the week, down less than a percent. On the other hand, energy was by far the worst performer as it plummeted almost 8 percent. These movements can be attributed to defensive posturing in equities markets as investors flee to safety stocks like utilities and consumer staples.
Individual ETF to Note
- VTI is an excellent ETF with a fantastic track record. VTI has returned 9.82% compound annual return for the past 30 years. VTI is a simple ETF based on a simple premise. VTI is comprised of almost every individual stock in the entire stock market. Diversity is a fundamental concept in investing. Through VTI an investor can easily gain access to the entire stock market by a single purchase. If diversification and capital appreciation is what you seek VTI is an option which should be explored and analyzed further.
Treasuries:
- Treasuries yields on the week were up as Friday prompted a massive increase in yields. Today’s increase in yields erased the drop seen in the middle of the week. Next week, just as for stocks, the CPI print will be major factor in the performance of Treasuries not only in the short term but also the long term.
Commodities:
Oil
- The energy sector, specifically Oil, has been heated since the invasion of Ukraine. However, a new development this week sent Oil and energy as a whole tumbling. An Oil price cap was instituted stirring tensions between the East and the West in Europe. As a result, the price cap pushed Oil back under 70$ a barrel to 1 year lows.
Gold
- Gold fell sharply on Monday but recovered its losses to close out the week unchanged.
BTC -17,138, 0.72% ETH - 1,264.58, -2.05%
- Crypto has been rattled as the FTX debacle drags on. Analysts at Standard Chartered bank are now warning of Bitcoin falling to 5,000. A fall to 5,000 would reduce Bitcoin’s market cap by hundreds of billions of dollars. Bitcoin’s future seems rather gloomy, but Bitcoin rallied to 17,000.
Europe:
Stoxx 600- 443.13, -0.94% DAX -14,370, -1.09% FTSE 100 -7,476, -1.05%
- Chart of the DAX (5-day)
-Inflation has been a big talk recently in America, but with no doubt it has had its effects in Europe as well. Polish c.Banker Tyrowicz said “There is absolutely no place today for talk of cutting interest rates in countries where inflation is as it is.” Investors should have a global eye on inflation.
- An EU banking watchdog reported that some banks may have difficulty repaying debts from the EU Central Bank. This is attributed to the very volatile economy and now banks are in a rush to repay them because borrowing costs are being raised.
Asia:
XJO (Australia)-7,213, -1.21% Shanghai 180 Index-8,504, 2.84% Nikkei 225- 27,901, 0.44%
- XJO 5-day Chart
