Market Look – Monday Morning Market Memo – March 14, 2022

Market Look – Monday Morning Market Memo – March 14, 2022

The stock market remains under pressure, with the three major indices all declining again last week – the Dow Jones Industrial Average fell 2% to 32,994 (its fifth consecutive weekly loss) – the NASDAQ Composite shed 3.5% to 12,844 – and the Standard & Poor’s 500 Index dropped 2.9% to 4,204.  The Dow and S&P are now in correction territory (down 10% or more), while the NASDAQ is in bear market territory (down 20% or more).

Factors behind the declining market include worries over inflation, the invasion of Ukraine, and a likely cycle of interest rate hikes by the Federal Reserve.  Additionally, and by no means last on the list – the stock market goes up AND down naturally.  While unpleasant and uncomfortable, corrections and bear markets are inherent in stock market investing.

Looking at some of the above more specifically, data released last Thursday showed the Consumer Price Index (consumer prices) rose 7.9% last month on a year-over-year basis, according to the Bureau of Labor Statistics, a notch worse than the bad number the market was already expecting.  The high inflation numbers are a primary factor behind a decline in consumer confidence.  Also released last week, the University of Michigan Consumer Sentiment Index fell to 59.7 last month, down from the prior read of 62.8 and below consensus estimates of 62.5.  All of this comes when the Federal Reserve is at the beginning of what will likely be a series of interest rate hikes.

According to the CME Fedwatch Tool, there’s currently a 98.3% chance the Fed will raise rates by a ¼ point when it meets this week.  More than this (almost certain) ¼ point increase in the target federal-funds rate, the financial markets will be focused on what the Fed says/implies/predicts about the rest of the year.  Markets are generally expecting the Fed to hike rates 5-7 times this year, but this is a fluid situation.  In addition to the Fed meeting this week and the Ukraine/geopolitical issues, which will be the primary focal points for the market, we’ll also get a fresh batch of economic data along with a key earnings report to digest.

Economic data due out this week includes February’s Producer Price IndexRetail Sales, Industrial Production, Housing Starts, and Existing Home Sales.  On the earnings side, markets will be looking at results from FedEx, which is considered an economic bellwether.  As we have mentioned previously, investors should expect the outsized volatility to continue given all the current events and uncertainties.  As always, please call us with any questions or concerns, or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC