Sage Investment Club

The ghost of 2022 is behind us in the stock market as the major indices closed higher for the 2nd consecutive week to start the new year. The gains have been led by the Nasdaq which rose by an oversized 4.82% this week (largest 1 week gain since November 7 week), after rising by near 1% last week.

The Nasdaq closed above its 100 day MA at 11057.78 with a close for the day and week at 11079.17. That is the first close above that MA going back to September 12, 2022.

The S&P index closed the week up 2.67% and like the Nasdaq, is closing above a key daily MA level. For it, the S&P is closing above its 200 day MA for the 1st time since December 1.

Risk on was the name of the game with Cathy Woods ARK Innovation rising by 14.73% for the week, which was the largest weekly gain for it since June 21, 2022 week, and the 4th largest weekly gain going back to April 2020..

CPI fears were eased a bit this week, when the CPI data for the month of December showed a MoM decline of -0.1% for the headline number on Thursday. The last 6 months MoM numbers cumulate to 0.9% over that time period, which if anualized comes to 1.8% YoY – below the 2% target for the Fed. The service inflation is still higher, however, which is likely to keep the Fed on the tighten path until it start to slow as well.

Nevertheless, there even more good things to come for the CPI going forward as some fairly lofty levels from the 1H of 2022, will start to fall out of the YoY calculations.

Moreover, Tesla today announced they were slashing the cost of the Model 3 by $3K and the Model Y by a whooping $13k (see Adam’s post on what is ahead for YoY inflation numbers).

The Michigan consumer survey (preliminary) saw 1 year inflation expectations fall to 4.0% since same level in June 2021. The Goldilocks number also showed above consensus numbers for the current conditions and expectations (see post here).

Univ of Michigan 1 year inflation down to 4%

The price of housing is also expected to come off going forward which will put a tailwind to the downside.

The problem with inflation remains the service sector where that measure of inflation rose by 0.6% in the CPI data this week (compared to the -0.1% decline).

Service CPI rose by 0.6% and remains elevated

Looking at the forex market today, the JPY remained well bid as trader gear up for the BOJ meeting on Wednesday. The CAD, NZD and EUR fought it out for the weakest of the major currencies today.

The strongest to the weakest of the major currencies today.

The USD fell vs all the major currencies this week led by a 3.21% move vs the JPY (JPY was higher by that amount). Looking at the changes for the week vs the greenback

  • EUR +1.80%
  • GBP. +1.21%
  • JPY +3.21%
  • CHF +0.61%
  • CAD +0.37%
  • AUD +1.52%
  • NZD +0.66%

In the US debt market this week:

  • 2 year yield fell -3.2 bps to 4.224%
  • 5 year yield fell -10.2 bps to 3.599%
  • 10 year yield fell -6.2 bps to 3.498%
  • 30 year yield fell -7.8 bps to 3.61%

In commodities, gold, silver and oil is ending the week higher. Natural gas is lower:

  • Gold is closing near the high for the week. It rose $54.70 or 2.93% at $1919.50. That is the highest close since April 11, 2022 week.
  • SIlver is up $0.46 or 1.947% at $24.25. That is also the highest close since April 11, 2022 week.
  • Crude oil is trading back above the $80 in post settlement trading (at $80.02). The gain for the week is $6.27 or 8.47%
  • Natural gas is trading down -$0.33 or -9.15% at $3.32.

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