Aviso Weekly Market Pulse: February 13th – February 17th

Feb 21, 2023

Market developments

Equities:
The U.S. market ended the week lower as higher than expected inflation data led to hawkish comments by Federal Reserve officials. The S&P 500 was down ~-0.3% after falling as much as 1% but was then lifted by consumer staples and utility stocks. The Nasdaq finished the week +0.4% as tech continues its strong year even as interest rates rise. Investors are closely watching the Fed comments on rates and are now estimating a ~5.3% peak rate later this year, compared to 4.9% two weeks ago.

Fixed income:
The U.S.10yr finished the week up 8bps to 3.81% as investors now expect interest rates to have a higher peak and stay higher for longer. We heard from Fed Reserve Bank of Cleveland President Loretta Mester who said she saw a compelling case for another 50bps hike and James Bullard said he would not rule out supporting a 50bps hike in March. It’s been a difficult couple of weeks for Fixed Income investors as high inflation and a strong labour market are forcing a more hawkish view from the Fed.

Commodities:
Oil fell this week, down -4.3% to $76.32 as hawkish signals from the Feb added to concerns of supply chain build up. Crude has had a volatile start to the year as the positive tailwind of China’s reopening is battling against the US economy that may potentially enter a recession.

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