WEEKLY SUMMARY: US “soft landing” hopes pushed stocks higher
Stocks resumed their winning streak on the back of some signals that the economy might avoid a recession in 2023. Consumer discretionary stocks were especially strong, thanks partly to a big jump in Tesla shares over the week following a favorable outlook. Defensive sectors (consumer staples, health care, and utilities) lagged. Value stocks underperformed growth shares. The strong start to the week on Monday was due in part to an article over the weekend by WSJ Nick Timiraos (known as the “Fed Whisperer”) who cited recent comments from Fed governor Christopher Waller, who highlighted “ample evidence” of slowing demand. On the Macro side, core (less food and energy) personal consumption expenditures (PCE) price index rose 4.4% over the year ended in December, still above the Fed’s 2% long-term inflation target, but well below its 5.4% peak in February 2022 and the slowest pace in 14 months. Earnings reports were again disappointing this week; Microsoft fell sharply after the company reported a larger-than-expected decline in earnings and a slump in revenues that it expects to continue into 2023. Other weak performers included IBM and Intel. The yield on the 10-year U.S. Treasury note increased moderately over the week. Shares in Europe rose as some encouraging economic data points helped to overcome concerns about the pace of monetary policy tightening. In Asia, the Hang Seng Index gained 2.96% for the holiday-shortened week. Bitcoin soared over $23k.