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Monthly Market Insights | February 2023

U.S. Markets

Stocks rallied in January as moderating inflation, a better-than-feared earnings season, and healthy economic data put investors in a buying mood.

For the month, the Dow Jones Industrial Average rose by 2.83 percent, the Standard & Poor’s 500 Index jumped by 6.18 percent, and the Nasdaq Composite vaulted by 10.68 percent.1

quotation mark icon

The four most dangerous words in investing are, it’s different this time.

Sir John Templeton, American-born British investor, fund manager, and philanthropist

Shift in Sentiment

The stock market opened the new year the way it ended the previous year, moving lower with high-growth names bearing the brunt of selling. Particularly troublesome to investors was the continued strength of the labor market, which heightened worries that the Fed would hike rates higher for longer to bring inflation to its target rate of 2.0 percent.

But market sentiment took a sharp U-turn after another cooling consumer inflation number reinforced the disinflationary trend of the last six months. Suddenly, investors appeared to adopt a different view of the future–one characterized by continued disinflation, a rate hike cycle nearing its end, and a fading probability of a near-term recession.2

The Power of Earnings

Corporate earnings provide some much-needed support for the rally. Investors were looking for insights to gauge the state of the U.S. economy through corporate reports and the guidance that management was offering on forward earnings prospects.

As of January 27th, with 29 percent of the companies comprising the S&P 500 Index reporting, 69 percent reported earnings above Wall Street estimates, less than the five-year average of 77 percent but strong enough to bolster confidence.3

A Winding Road Higher

The march toward higher stock prices did not follow a straight line. The month’s trading was choppy, with stretches that saw the resurfacing of recession fears and anxieties over future Fed rate hikes. For instance, stocks retreated midmonth on weak retail sales and manufacturing data that raised concerns that the Fed might have gone too far in raising rates.

As the month ended, stocks wavered ahead of a busy week for earnings and the scheduled Fed meeting. But they regained their footing on the final day of trading to close out a strong month.

Sector Scorecard

Most industry sectors ended higher in January, including Communications Services (+14.77 percent), Consumer Discretionary (+15.13 percent), Energy (+2.81 percent), Financials (+6.81 percent), Industrials (+3.71 percent), Materials (+8.97 percent), Real Estate (+9.91 percent), and Technology (+9.26 percent). Three sectors posted losses: Consumer Staples (-1.09 percent), Health Care (-1.83 percent), and Utilities (-2.00 percent).4

U.S. Market Recap for January 2023MMI logo
S&P 500
red down arrow6.18
Month (%)
‌
red down arrow6.18
Year-to-Date (%)
Nasdaq
red down arrow10.68
Month (%)
‌
red down arrow10.68
Year-to-Date (%)
Russell 1000
red down arrow6.60
Month (%)
‌
red down arrow6.60
Year-to-Date (%)
10-Year Treasury
green up arrow3.53
Month (%)
‌
green up arrow-0.35
Year-to-Date (%)
Yahoo Finance, January 31, 2023. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.

What Investors May Be Talking About in February

In the month ahead, investors are expected to dig into the details of the January inflation report scheduled for release on February 14.5

Investors cheered when the December update showed that inflation dropped again, confirming a six-month downtrend.

While the cost of goods has dropped over that time, the cost of services has stubbornly remained high.

In gauging how the Fed is viewing inflation progress, investors may keep an eye on the labor market, a major contributor to service costs. The Fed has expressed that a tight labor market, with its attendant wage gains, places upward pressure on inflation.

Consequently, wage trend reports, including the monthly Employment Situation Summary and the Atlanta Fed’s monthly Wage Growth Tracker, along with the services inflation number, may become the real headlines going forward.

World Markets

The MSCI EAFE Index gained 8.05 percent, sparked by falling inflation, an improving economic outlook in Europe, and the continued reopening of China.6

European markets saw solid gains, led by Italy, which picked up 12.03 percent. France tacked on 9.40 percent, Germany rose by 8.65 percent, and the U.K. advanced by 4.29 percent.7

On the Pacific Rim, China’s Hang Seng Index rose by 11.57 percent, and Australia’s ASX 200 climbed by 6.22 percent. Closest to the U.S., Mexico’s IPC All-Share rallied 12.59 percent.8

World Market Recap for January 2023MMI logo
Emerging Markets January (%) Year-to-Date (%)
Hang Seng (China) red down arrow11.57 red down arrow11.57
KOSPI (Korea) red down arrow8.44 red down arrow8.44
Nikkei (Japan) red down arrow4.72 red down arrow4.72
Sensex (India) red down arrow-2.12 red down arrow-2.12
EGX 30 (Egypt) red down arrow12.66 red down arrow12.66
Bovespa (Brazil) red down arrow3.18 green up arrow3.18
IPC All-Share (Mexico) red down arrow12.59 red down arrow12.59
ASX 200 (Australia) red down arrow6.22 red down arrow6.22
Europe    
DAX (Germany) red down arrow8.65 red down arrow8.65
CAC 40 (France) red down arrow9.40 red down arrow9.40
IBEX 35 (Spain) green up arrow9.78 red down arrow9.78
FTSE 100 (United Kingdom) green up arrow4.29 green up arrow4.29
IT40 (Italy) red down arrow12.03 red down arrow12.03
Yahoo Finance, January 31, 2023. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Indicators

Gross Domestic Product (GDP)

The nation’s economy grew at a 2.9 percent annualized rate in the fourth quarter. This represented a slowdown from the 3.2 percent expansion in the third quarter, though it is a tick higher than the 2.8 percent consensus estimate by economists.9

Employment

Employers added 223,000 jobs in December, while wage growth slowed to a 0.3 percent gain from the previous month and 4.6 percent from a year ago. The unemployment rate fell to 3.5 percent.10

Retail Sales

Retail sales fell by 1.1 percent in December, while November sales were revised downward. It was the second consecutive month of month-over-month declines and the largest contraction in a year.11

Industrial Production

Industrial production declined by 0.7 percent, led by a 1.3 percent decline in manufacturing output. Output by the nation’s factories, mines, and utilities fell by 1.7 percent on an annualized basis in the fourth quarter.12

Housing

Housing starts dropped by 1.4 percent in December, though single-family housing starts rebounded by 11.3 percent.13

Sales of existing homes fell for the 11th consecutive month, slipping by 1.5 percent in December. For the full year of 2022, sales declined by 17.8 percent—the weakest annual result since 2014.14

New home sales rose by 2.3 percent, making it the third consecutive month of increases, though 2022 sales fell to their lowest level in four years.15

Consumer Price Index (CPI)

The rise in consumer prices slowed for the sixth month straight, falling by 0.1 percent month over month and decelerating to a 6.5 percent increase from a year ago. Core prices (excluding energy and food) rose by 5.7 percent, an easing from November’s 6.0 percent year-over-year jump.16

Durable Goods Orders

Orders for long-lasting goods rose by 5.6 percent in December—well above the 2.4 percent forecast.17

The Fed

Minutes from December’s meeting of the Federal Open Market Committee (FOMC) reflected concerns that investors’ hopes of near-term easing in short-term rate hikes could make the Fed’s job of combating inflation more difficult.18

These minutes also indicated that additional rate hikes are likely, at least through the spring, with any potential cuts not expected to occur until sometime in 2024.

Fed officials welcomed the recent cooling in monthly inflation numbers but would require more sustained progress before they felt confident that inflation was under control.18

By the Numbers: Mardi Gras19

1592

Year Mardi Gras was made a Christian holiday by Pope Gregory XIII

March 3, 1699

Date New Orleans was founded

1703

Year the first recorded Mardi Gras celebration was held

Mobile, Alabama

Place first Mardi Gras celebration happened

1837

Year the first recorded Mardi Gras parade happened in New Orleans

1896

Year the first female Krewe (social club) hosted a Mardi Gras ball

29

Number of New Orleans parishes that celebrate Mardi Gras

2

Number of Alabama counties that celebrate Mardi Gras

93,000 pounds

Weight of beads pulled from the New Orleans sewers in a 5 block radius in 2017–2018

45 million tons of beads

Total number of beads pulled from the New Orleans sewers in 2017–2018


 

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, or state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, timeframe, and risk tolerance.

The forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and considered a broad indicator of the performance of stocks of technology and growth companies. The Russell 1000 Index is an index that measures the performance of the highest-ranking 1,000 stocks in the Russell 3000 Index, which is comprised of 3,000 of the largest U.S. stocks. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark for the performance in major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

The Hang Seng Index is a benchmark index for the blue-chip stocks traded on the Hong Kong Stock Exchange. The KOSPI is an index of all stocks traded on the Korean Stock Exchange. The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. The SENSEX is a stock market index of 30 companies listed on the Bombay Stock Exchange. The Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange. The Bovespa Index tracks 50 stocks traded on the Sao Paulo Stock, Mercantile, & Futures Exchange. The IPC Index measures the companies listed on the Mexican Stock Exchange. The MERVAL tracks the performance of large companies based in Argentina. The ASX 200 Index is an index of stocks listed on the Australian Securities Exchange. The DAX is a market index consisting of the 30 German companies trading on the Frankfurt Stock Exchange. The CAC 40 is a benchmark for the 40 most significant companies on the French Stock Market Exchange. The Dow Jones Russia Index measures the performance of leading Russian Global Depositary Receipts (GDRs) that trade on the London Stock Exchange. The FTSE 100 Index is an index of the 100 companies with the highest market capitalization listed on the London Stock Exchange.

Please consult your financial professional for additional information.

Copyright 2023 FMG Suite.

1. WSJ.com, January 31, 2023

2. CNBC.com, January 12, 2023

3. Insight.FactSet.com, January 27, 2023

4. SectorSPDR.com, January 31, 2023

5. BLS.gov, January 31, 2023

6. MSCI.com, January 31, 2023

7. MSCI.com, January 31, 2023

8. MSCI.com, January 31, 2023

9. CNBC.com, January 26, 2023

10. WSJ.com, January 6, 2023

11. WSJ.com, January 18, 2023

12. FederalReserve.gov, January 18, 2023

13. Reuters.com, January 19, 2023

14. WSJ.com, January 20, 2023

15. Bloomberg.com, January 26, 2023

16. WSJ.com, January 12, 2023

17. CNBC.com, January 26, 2023

18. WSJ.com, January 4, 2023

19. CNN.com, March 6, 2022

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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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