Weekly Market Update: April 21, 2023

Market Data as of Week Ending: 4/21/2023 unless noted otherwise 

U.S. stock prices edged slightly lower last week with the S&P 500 declining 0.09% as investors grew increasingly uncertain about the U.S. debt ceiling. After the second week of earnings season, 76% of S&P 500 companies had beaten analysts’ quarterly net income expectations, according to FactSet, which puts that so-called beat rate slightly below the 77% five-year average. Growth stocks reversed the trend and were able to outperform their value counterparts, while smaller-sized companies once again outperformed their large-cap peers. Traditionally defensive sectors in consumer staples and utilities led gainers, while sensitive sectors in communication services and information technology closed the week with a loss. The energy sector declined as oil prices fell on renewed concerns over weakening demand despite lower crude inventories. Developed foreign and emerging markets stocks were mixed for the week, with developed markets outperforming domestic equities.

U.S. Treasury yields moved higher last week as UK CPI data came in higher than expected, which increased the expectation that the Fed would hike rates in May. The 10-year and 2-year U.S. Treasury yields ended the week higher at 3.57% and 4.17%, respectively. Returns were negative across the fixed income spectrum as investment grade corporates held up the best, outperforming across the curve. Yields for investment grade corporate bonds and high yield bonds ended the week higher at 5.2% and 8.6%, respectively.

Economic data for the week was mixed but ultimately pointed to a slowing economy. The New York Fed's Empire State business conditions index increased 35.4 points to 10.8 in April, marking the first reading in positive territory in five months. The National Association of Home Builders monthly confidence index rose one point to 45 in April as a lack of listings on the resale market is boosting demand for new construction. Construction for new homes fell 0.8% in March to a rate of 1.42 million due to slower work on apartment buildings. The Philadelphia Fed manufacturing index fell to -31.3 in April, marking the eighth straight reading below zero and the tenth in the last 11 months. The U.S. leading economic index sank 1.2% in March, its biggest decline in three years and the 12th month in a row. The S&P flash PMI readings showed the U.S. services sector rebound to a 12-month high of 53.7 in April, while the manufacturing sector came in above 50 for the first time in six months at 50.4. In Europe, the United Kingdom's inflation slowed less than forecast with the annual CPI dipping to 10.1% from 10.4% in February, led by surging food and drink prices.

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