An Uneventful Week for the S&P 500

After the previous week's Fed-driven volatile action, investors got some relief in the second week of May 2023.

Despite the relative stillness, there wasn't enough positive news to offset the negative to boost the U.S. stock market higher. The S&P 500 (Index: SPX) closed the week at 4124.08, down 0.3% from the previous week's level.

The market's most distressed sectors continue to be those most negatively impacted by the Fed's series of rate hikes, which includes regional banks, commercial real estate investment trusts, and financial services firms. That assessment is based on our regular sampling of firms announcing reduced dividend payouts this month, which includes smaller firms that aren't found in the S&P 500.

Meanwhile, the larger cap firms that make up the index have been turning in better than expected earnings, so the news is not all gloomy. We'll revisit the earnings outlook for the S&P 500 later this week, but first, here's the latest update to the alternative futures chart,

The trajectory of the S&P 500 continues to track well within the redzone forecast range indicated on the chart.

But then, that's exactly what should be expected for such an overall uneventful week. Here is our summary of what passed for the week's market-moving headlines.

Monday, 8 May 2023

• Signs and portents for the U.S. economy:
• Bank buyers expect sweeteners as US government sets new bar
• Bigger trouble developing in the Eurozone:
• German industrial output slumps, recession fears rise
• Mixed economic signs for global economy out of Asia:
• China's exports seen rising in April but at slower pace, outlook challenging
• Taiwan April exports slip for 8th month, but beat forecasts
• BOJ minions worried about inflation overshooting their target:
• Bank of Japan debated risk of inflation overshoot in March
• Japan's service activity grows at record pace in April - PMI
• ECB minion doesn't say anything insightful:
• Euro zone inflation will slow but momentum still high: ECB's Lane
• Wall Street ends near flat ahead of inflation data

Tuesday, 9 May 2023

• Signs and portents for the U.S. economy:
• Oil recoups losses on plans for SPR refill, higher seasonal demand
• U.S. home buyers persevere despite high rates, prices: study
• Fed minions try to pretend they're not done with rate hikes, claim economy is slowing in "orderly" manner:
• Premature for Fed to call end to rate hikes with inflation still high, Williams says
• Fed's Jefferson says economy slowing in "orderly" manner
• Bigger trouble developing in China:
• China's shrinking imports, slower exports growth darken economic outlook
• BOJ minions say never-ending stimulus will never end, get reason to continue:
• BOJ's Ueda says yield control will end when price goal achievement foreseen
• Japan's spending downturn, wages decline heighten pressure on economy
• ECB minions excited by high rates, thinking about hiking them higher:
• ECB may need to raise rates for longer than anticipated: Kazimir
• ECB's Schnabel sees more rate hikes until core inflation declines too
• Wall Street closes down as focus shifts to inflation data, debt talks

Wednesday, 10 May 2023

• Signs and portents for the U.S. economy:
• US credit crunch didn't start with SVB collapse, and may not end there
• US consumer prices increase solidly in April
• US April CPI rise gives Fed little room for pivot soon
• Fed minions expected to pivot away from rate hikes sooner after better-than-expected inflation report:
• US April CPI rise gives Fed little room for pivot soon
• BOJ minions say they'll say when they'll end never-ending stimulus, see faster growth in Japan:
• BOJ's Ueda vows to communicate exit path once inflation sustainable
• Japan GDP growth likely accelerated in Q1 on robust services consumption- Reuters poll
• Non-ECB minion says ECB will be done with rate hikes this year, ECB minions say their rate hikes will be "more marginal" and are near peak:
• Greece's Stournaras sees ECB rate hikes ending this year
• Future ECB rate moves will be "more marginal", says Villeroy
• ECB's Centeno says interest rates near peak, could ease in 2024
• Nasdaq rallies as investors cheer inflation data, Alphabet
• Traders bet on end to Fed rate hikes after April inflation data
• Analysis: Inflation may not be cooling fast enough to justify stock valuations

Thursday, 11 May 2023

• Signs and portents for the U.S. economy:
• US weekly jobless claims hit 1-1/2-year high; inflation subsiding
• US producer prices increase moderately in April
• Fed minions claim they'll keep interest rates high for "extended" time, admit climate change isn't serious financial risk:
• Climate change not 'serious risk' to financial stability, Fed's Waller says
• Fed's Kashkari says tight monetary policy may be needed for 'extended' time
• Fed headed for a pause, then rate cuts, traders bet
• Bigger trouble developing in Asia:
• South Korea think tank cuts 2023 growth forecast due to poor exports
• China's slow consumer inflation, deepening factory gate deflation to test policy
• Slump in China bank loans, prices raise more worries about recovery, adds pressure on central bank
• ECB minions think services are where their inflation problem is:
• ECB's de Guindos singles out services as top inflation worry
• Euro zone consumers raise inflation expectations - ECB survey
• Dow, S&P 500 fall with Disney; PacWest leads regional banks lower
• Disney shares fall most since Iger's return after streaming subscriber losses
• PacWest shares plunge after it reports drop in deposits
• Deposit outflows after SVB collapse concentrated among 'super-regionals' - New York Fed study

Friday, 12 May 2023

• Signs and portents for the U.S. economy:
• Oil prices rise as supply deficit counters demand fears
• Record U.S. crude exports, rising shale output boosts oil flow to Houston
• Fed minions say they're not done fighting President Biden's "insidious" inflation with rate hikes, claiming they're on the right track:
• Fed policy on right track, but inflation still too high, officials say
• Fed's Jefferson: inflation 'insidious,' need to bring it down
• Fed's Bowman: more policy tightening likely appropriate
• Fed's Bullard: disinflation prospects 'good' but not guaranteed
• Stocks Fall as Banking, Inflation Concerns Linger
• Indexes end down with tech-related shares; consumer sentiment falls

As in previous weeks, we've omitted the week's news coverage of the debt ceiling debate in Washington, D.C. in this week's summary. For all the headlines being generated about it, there's little sign it's contributing more than minimal noise to the trajectory of stock prices at this point of time. That may change and, if and when it does, we'll take note of whatever news it is that moves the needle for stock prices.

The CME Group's FedWatch Tool continues to indicate investors believe the Fed has reached the end of the series it began in March 2022 to combat President Biden’s inflation. The FedWatch Tool continues to project the Fed will hold the Federal Funds Rate at a target range of 5.00-5.25% until its 20 September (2023-Q3) meeting, at which time the Fed will initiate a series of quarter point rate cuts at six-to-twelve-week intervals to address building recessionary conditions in the U.S.

The Atlanta Fed's GDPNow tool projects a real GDP growth rate of +2.7% in 2023-Q2, up slightly from the +2.5% growth rate it anticipated a week earlier.

Image credit: Photo by Joshua J. Cotten on Unsplash.