Market Updates Archive
Week Ending on Friday, February 10th
Published February 13, 2023
After weeks of rallying, we saw the first week where all indexes finished negative. The week just ended was also the worst week for the S&P 500 index and the NASDAQ 100 Index in 2023. Investors are cautiously waiting for the inflation (CPI) report Tuesday morning. Also, corporate earnings last week were mixed with several high-profile companies reporting worse-than-expected results with lowered future guidance for 2023.
Below are the results for last week, February MTD, and 2023 YTD.
| Index | Daily Returns (January 30th – February 3rd) | Weekly Return |
February Return |
2023 Return |
||||
|---|---|---|---|---|---|---|---|---|
| Mon. | Tue. | Wed. | Thu. | Fri. | ||||
| S&P 500 | –0.61% | +1.31% | –1.09% | –0.87% | +0.23% | –1.05% | +0.38% | +6.70% |
| NASDAQ 100 | –0.85% | +2.07% | –1.78% | –0.88% | –0.66% | –2.12% | +1.72% | +12.55% |
| Dow Jones 30 | –0.15% | +0.90% | –0.61% | –0.69% | +0.49% | –0.07% | –0.62% | +2.32% |
| Developed Non-US | –1.02% | +0.85% | –0.62% | +0.18% | –0.44% | –1.05% | –1.23% | +7.66% |
| Emerging Markets | –1.47% | +0.40% | –0.12% | +0.47% | –0.96% | –1.69% | –2.83% | +6.04% |
| Core Bonds | –0.55% | –0.17% | +0.14% | –0.39% | –0.44% | –1.40% | –1.55% | +1.73% |
International Trade Balance
The US trade deficit reached record levels in 2022 at $948.1 billion, increasing over 12% from 2021. With lower US exports due to reduced demand and oil prices, the monthly trade deficit in December also increased more than 10% to $67.4 billion. While imports increased during the month, the declining exports, particularly in industrial products and crude oil, are reflective of the weakened manufacturing industry that’s been seen in other metrics. The reduced exports are also worsened by the appreciation of the US dollar (making goods more expensive for other countries to import) and tighter monetary policy globally.
Consumer Credit Report
US consumer credit increased 7.8% in 2022 with revolving and nonrevolving credit increasing 14.8% and 5.6%, respectively. In the fourth quarter consumer credit increased 6.5% on a seasonally adjusted rate and December saw an annual 2.9% increase. Credit card debt increased 18.5% in 2022 to a record $931 billion. The average balance rose $5,805 in 2022. As the Federal Reserve continues to increase short-term interest rates, the cost of carrying this debt increases with the result most likely being higher consumer defaults.
Wholesale Inventories
Final read for wholesale inventories for the month of December was up +0.1% month over month which was the lowest month over month change since July, 2020. Trade sales (inventory sales) was flat for December but the revision to November’s number was down -1.4%. Both of these metrics point to declining demand due to slower sales leading to lower demand for inventory re-stock.
University of Michigan Consumer Sentiment
Preliminary results for the University of Michigan’s index on consumer sentiment were released on Friday showing a slight uptick in February to 66.4 from January’s 64.9 reading. The index is at a 13-month high, and the rise is credited to the recent market rally and the continued strength of the labor market. In contrast, the sub-index for short-term inflation expectations also rose since January but is still below December’s reading. Most importantly, the index is a sign that many may believe that a recession, if not avoided entirely, would be short-lived.
Earnings Reports
The following are some key company earnings results.
BP (BP) reported record annual profits of $27.6 billion net profit—exceeding the previous high of $26.6 billion achieved in 2008. The results are in line with earnings reports from other oil and gas companies that are also realizing record profits for 2022. With the positive metrics, BP stock rose more than 15% during the week.
Disney (DIS) exceeded expectations for fourth quarter earnings with respect to revenue and profits. The company also announced plans to restructure, reduce costs, and cut jobs. Disney ended the week down –2.4% but the stock remains up nearly 25% YTD.
CVS (CVS) reported higher-than-expected revenue and earnings-per-share (EPS). It also announced the acquisition of primary care provider Oak Street Health, which has 160 centers that CVS plans to nearly double over several years. CVS stock rose 4.5% over the week.
AbbVie (ABBV) beat earnings-per-share (EPS) estimates but reported lower-than-expected revenues. Although the company’s highest earning drug is facing competition in the US for the first time and sales are expected to drop for 2023, the company announced plans to expand other areas and ABBV stock rose 4.7% for the week.
PepsiCo (PEP) exceeded expectations for the fourth quarter despite sales volumes shrinking over the quarter. The company has raised prices due to inflationary pressures, and it looks like it will continue to do so until these pressures ease. The results helped raise PEP stock by 4.2% over the week bringing it back to nearly flat since the start of 2023.
Up Next
This week will be full of economic data, including consumer price index (CPI) on Tuesday, retail sales on Wednesday, and building permits as well as producer price index (PPI) on Thursday. Earnings season also continues with Coca-Cola (KO), Cisco Systems (CSCO), Applied Materials (AMAT), Deere & CO (DE) among others reporting.
Something Completely Different
The Japanese government formally approved several key measures last week which will promote and expand the use of nuclear power in this resource-scarce country. While many remember the nuclear accident in 2011 which was caused by the 9.0 earthquake resulting in a tsunami which overwhelmed the 3 reactors at Fukushima, the Ukraine war has caused higher energy prices globally, putting pressure on those countries who buy their energy on the open market. The approved measures include allowing current reactors to operate beyond their 60 year life, require new, advanced reactors to be built on the soon-to-be decommissioned reactor sites and makes the central government responsible for all future disposal of waste. These efforts are all being done under the umbrella of a country-wide “green” initiative.