Weekly Recap | May 9, 2022

May 2-6, 2022 Recap

Nasdaq Stocks Extend Bear Market

S&P 500 Declines a Fifth Week
The Dow Industrials and S&P 500 ended fractionally lower last week amid intense volatility as investors assessed the economic growth impact of the Federal Reserve’s ½-point rate hike and policy outlook announced on Wednesday.  Meanwhile, China’s two largest cities remain in lockdown yet another week, adding more complications to supply-chain disruptions already aggravated by Russia’s intensifying war in Ukraine. Despite the fractional setback, the S&P 500 capped a fifth weekly loss, its longest weekly losing streak in over a decade (since June 2011) and is off 13.6% from its record high set on the first trading day of the new year. For the Nasdaq Composite, which is down 24% from its record-setting peak almost six months ago on November 19, 2021, the bull market is over.

For the Week…
The S&P 500 fell 0.18%, extending its YTD loss to over 13%. The index is now in its second-longest contraction period since the global financial crisis. The Dow Jones Industrial Average slipped 0.24%, and the Nasdaq Composite lost 1.50%, its fifth-straight weekly loss of at least 1%, its longest such stretch since August 2002.

Jobless Claims Edge Higher
Initial jobless claims rose by 19,000 to an 11-week high of 200,000 last week. Unemployment claims missed estimates (180,000). Despite the increase, jobless claims remain very low historically. Continuing claims fell by 19,000 to 1.384 million, the fewest since 1970.

Energy Up the Most, Week & Year
Five of the 11 major sector groups posted weekly gains, led by Energy (+10.17%), Utilities (+1.30%) and Communication Services (+1.06%). Healthcare (-0.45%) fell the least, while Real Estate (-3.75%), Consumer Discretionary (-3.37%) and Consumer Staples (-1.30%) fell the most. Energy (+50.81% YTD) is this year’s best performing sector.

Treasury Yields Rise
Earlier term yields were little changed last week while longer maturity bond yields surged to levels not seen since 2018. This after the Fed raised its target rate by 0.50% to 0.75%-1.00%. Fed Chairman Jerome Powell surprised markets by virtually ruling out more aggressive 0.75% hikes ahead, signaling ½-point rate hikes in June and July. The yield on 10-year Treasury notes ended Friday at 3.126%. The U.S. Dollar Index strengthened by 0.68% last week, reaching a fresh two-year high. U.S. WTI crude oil futures finished the week at $109.77/barrel, up from $104.69 the week prior.

The Latest from @CeteraIM

Quarterly Wage Pressures Ease

Wednesday Gains Erased

 Wednesday Fed Hikes Rates by 50 BPS

Economic Calendar

Monday, May 9
Wholesale Inventories, Wholesale Trade Sales.

Tuesday, May 10
NFIB Small Business Optimism.

Wednesday, May 11
Mortgage Activity, Consumer Price Index, Hourly Earnings, Monthly Budget Statement.

Thursday, May 12
Jobless Claims, Producer Price Index.

Friday, May 13
Import/Export Prices, Consumer Sentiment.

Jobs growth remains robust through April. The labor market expanded by 428,000 last month, the 12^th-straight month of jobs growth exceeding 400,000. The combination of hot inflation and strong labor market growth led to the Federal Reserve increasing the federal funds rate by 0.50% for the first time in more than 20 years. Strong labor market growth is one reason why we do not see a recession in the near term. With that said, we do expect labor market growth to slow from very high levels through year-end.

^{This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.}

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^{No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The opinions expressed are as of the date published and may change without notice. Any forward-looking statements are based on assumptions, may not materialize, and are subject to revision.}

^{All economic and performance information is historical and not indicative of future results. Investors cannot directly invest in unmanaged indices. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards.}

^Glossary

^{The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.}

^{The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.}

^{The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.}

^{The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.}

^{The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.}

^{The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.}

^{The Bloomberg US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.}

^{The Bloomberg US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.}

^{The Bloomberg US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.}

^{The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.}

^{The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.}

^{The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.}

^{The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.}

^{The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.}

^{The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.}