The S&P 500 in a Week When Not Much Happened to Change Anything

The S&P 500 (Index: SPX) ended the week down 26.48 points from the previous Friday, closing at 3,972.61.

In between the two Fridays, the index dipped and recovered, but otherwise experienced an uneventful week.

We find the level of the S&P 500 is consistent with investors holding their focus on 2023-Q1, which itself is consistent with the expecting timing of the peak of the Federal Reserve’s ongoing series of rate hikes. Meanwhile, here are the week’s not-so market moving headlines, which reinforce why investors are holding their focus on the current quarter of 2023-Q1:

Tuesday, 17 January 2023

• Signs and portents for the U.S. economy:

• Oil prices hit two-week highs on hopes of China demand rebound
• U.S. household spending gains moderated in December, NY Fed says
• New York state manufacturing plunges in January

Fed minions suddenly gripped by grasp of the obvious:

• Barkin: Terminal rate for Fed depends on path of inflation -Fox Business
• Fed’s Williams: Making economy inclusive has benefits for overall activity

Bigger trouble developing in China:

• China’s 2022 economic growth one of the worst on record, post-pandemic policy faces test
• China’s 2022 property investment falls for first time since 1999

• China developers’ debt risks persist after support policies’ slow start

China Dec industrial output up 1.3%, retail sales down 1.8%

Less trouble than expected developing in the Eurozone:

• German economy expected to contract slightly in 2023 – BDI
• German economy minister: recession threatening Europe manageable

BOJ minions rethinking never-ending stimulus policies:

• Japan’s yield control faces biggest test to date as BOJ debates policy

• Marketmind: BOJ’s moment of truth
• Column-Bank of Japan shift exposes global bond cracks: McGeever

ECB minions thinking about smaller rate hikes:

• European shares close up after report says ECB considering smaller rate hikes

Goldman, Travelers drag Dow lower as earnings season picks up

Wednesday, 18 January 2023

• Signs and portents for the U.S. economy:

• U.S. mortgage interest rates fall to lowest levels since September – MBA
• Heavy slate of U.S. oil refinery overhauls to crimp fuel output
• U.S. retail sales post biggest drop in a year; inflation retreating

• U.S. holiday sales miss estimates as inflation weighs on demand – NRF

U.S. firms pessimistic about economic growth this year, Fed survey shows

U.S. manufacturing output tumbles in December

Fed minions say 5% and/or bust, ready for smaller rate hikes, and that Fed has no problems from how its structured:

• Fed policymakers call for target interest rate above 5% to beat inflation

• Fed’s Harker says ready to downshift to 25-basis-point rate hikes
• Fed’s Bullard urges colleagues not to “stall” on remaining rate increases

Fed’s current structure has boosted public confidence, George says

BOJ minions have their hands full sustaining never-ending stimulus:

• Bank of Japan keeps yield control policy unchanged

• Yen lower as BOJ sticks to ultra-easy policy, losses trimmed
• Analysis-Japan’s yen feels the heat from hard-line BOJ policy

Quotes: BOJ Governor Kuroda’s comments at news conference

• Analysis-BOJ has markets bracing for more bond, FX turmoil as shift seen inevitable

ECB minions long for days of 2% inflation:

• ECB’s Villeroy reaffirms determination to get inflation down to around 2% -Bloomberg TV

Wall St closes lower after weak data, hawkish Fed comments

• In 2022 inflation data trumped Fed comments for moving markets, report says

Thursday, 19 January 2023

• Signs and portents for the U.S. economy:

• https://www.reuters.com/article/usa-economy-kemp/column-u-s-manufacturing-has-probably-entered-recession-kemp-idUSKBN2TY1J7
• U.S. labor market still tight; housing mired in recession
• U.S. hits debt ceiling amid standoff between Republicans and Democrats

• U.S. debt limit negotiations to take time, but agreement expected -Moody’s

Oil prices rally to highest close since Dec. 1 on China optimism

Fed minions, U.S. big bank trying hard to sell higher than 5% interest rates, Fed minions claims they’ll deliver ‘soft landing’ recession:

• Fed ‘probing’ for right rate level as prospects rise for ‘soft landing’

• Fed’s Collins sees U.S. interest rate hike peak “just above” 5%
• JPMorgan CEO Dimon sees interest rates going beyond 5% – CNBC

Fed’s Brainard says data may be aligning for ‘soft landing’ scenario

Post-Zero-Covid lockdown recovery, more stimulus developing in China:

• Chinese companies set for biggest earnings growth in 5 years in 2023-Refinitiv data

• COVID-hit Chinese factories eye gradual recovery after Lunar New Year break

China seen keeping benchmark lending rates unchanged for fifth month

Signs of bigger trouble still developing in China:

• Slumping China-bound Japanese exports raise fears of global downturn

Central bank minions signal they’re mostly done with rate hikes:

• Indonesia central bank signals end of rate hike cycle as inflation cools
• Taiwan central bank debated larger rate hike, minutes show

BOJ minions thinking about ending never-ending stimulus:

• BOJ may raise yield cap again by mid-year, says academic Ito
• Analysis-BOJ bullishness on wages suggests days of super-low rates are numbered

ECB minions thinking more about bigger rate hikes:

• ECB pushes back against bets on smaller rate hikes

Wall St slips as labor market data fuels Fed worry

Friday, 20 January 2023

• Signs and portents for the U.S. economy:

• Oil settles up more than 1% on China demand outlook, second weekly gain
• U.S. home sales drop to 12-year low; price growth cools

Fed minions signal smaller rate hike ahead:

• Fed’s Waller, citing “good news,” backs quarter-point increase at next meeting
• Fed can likely slow runoff as bank reserves near 10% to 11% of GDP

Bigger trouble developing because of China:

• China reopening will add to global inflationary pressures, ECB’s Lagarde says

Central bank rate hikes expected to sputter out:

• Smaller Fed rate hike may augur end to ‘ongoing’ increases
• BoC to raise rates by 25 bps to peak of 4.50% on Jan. 25: Reuters poll

BOJ minions determined to keep never-ending stimulus alive despite inflation:

• BOJ’s Kuroda vows to keep ultra-loose policy
• BOJ may have crafted new tool for post-YCC era – analyst

• Explainer-How the BOJ’s new yield-controlling tool works

Japan’s consumer inflation hits fresh 41-year high, keep BOJ in focus

• Tokyo core inflation likely double BOJ’s 2% target in January: Reuters Poll

ECB minions signal more half point rate hikes ahead:

• ECB’s Holzmann expects at least two rate increases in H1 -newspaper

Wall Street rallies to end higher on Alphabet, Netflix lift

The CME Group’s FedWatch Tool continues to project quarter point rate hikes at both the Fed’s upcoming 1 February and 22 March (2023-Q1) meetings, with the latter representing the last for the Fed’s series of rate hikes that started in March 2022. The FedWatch tool then anticipates the Fed will hold the Federal Funds Rate at a target range of 4.75-5.00% through September 2023. After which, developing expectations for a U.S. recession in 2023 have the FedWatch tool projecting quarter point rate cuts in both November and December (2023-Q4).

The Atlanta Fed’s GDPNow tool‘s latest projection for real GDP growth in the fourth quarter of 2022 dropped +3.5% from last week’s +4.1% estimate. Meanwhile, the so-called “Blue Chip” consensus forecast anticipates a +1.7% growth rate. The BEA will issue its first estimate of 2022-Q4′s GDP later this month, on Thursday, 26 January 2023.