Stock Market This Week – 02/04/23

Stock Market This Week

Stock Market This Week – 02/04/23

The stock market had another positive week, despite the fear of more interest rate increases. Good news on the inflation front combined with well-received results from Meta (META) caused the market, especially tech stocks, to surge. Fortunately, the U.S. Federal Reserve only raised the Federal Funds rate by 0.25%. Although Chairman Powell indicated more rate increases would occur in the future, the market is doubting it. That said, the robust jobs report and unemployment at the lowest level in 53 years reversed stock momentum. Unfortunately, this was followed by poor results from Amazon.inc (AMZN) and Google (GOOG).

As shown by data from Stock Rover*, all the major indices had positive returns except the Dow Jones Industrial Average (DJIA). The Russell 2000 and the Nasdaq had excellent weeks as tech, and small-cap stocks continued to climb. The S&P 500 Index performed reasonably well. The Dow 30 performed the worst again, continuing a turnaround of last year’s trends. Oil plunged, but the VIX rose. The VIX is near its long-term average.

Nine of the eleven sectors again posted gains for the week. The Communication Services sector led the way, followed by Technology and Consumer Cyclical. Conversely, the worst-performing indices were Utilities and Energy.

The Nasdaq is performing the best for the year, with gains in the mid-teens, followed by the Russell 2000. But all the major indices are up. In addition, all 7 of the 11 sectors are up year-to-date. Only more defensive sectors, like Energy, Healthcare, Utilities, and Consumer Defensive, were down. The Energy sector performed the best in 2022.

The dividend growth investing strategy has performed relatively well, with positive returns. The table below shows their performance by category. All categories are now in positive territory.

Dividend Increases and Reinstatements

Search for a stock in the list of dividend increases and reinstatements. This list is updated weekly. In addition, you can search for your stocks by company name, ticker, and date.

Dividend Cuts and Suspensions List

The dividend cuts and suspensions list was most recently updated at the end of January 2023. As a result, the number of companies on the list has risen to 610. Thus, well over 10% of companies that pay dividends have cut or suspended them since the start of the COVID-19 pandemic. The list is updated monthly.

Eight new additions indicate companies are starting to experience headwinds in January 2023.

Stock Market Valuation This Week

The S&P 500 Index is trading at a price-to-earnings ratio of 22.11X, and the Schiller P/E Ratio is about 30.04. These multiples are based on trailing twelve months (TTM) earnings.

The long-term means of these two ratios are approximately 16X and 17X, respectively. 

The market is still overvalued despite the recent correction and a bear market and rebound. Earnings multiples of more than 30X are overvalued based on historical data.

Stock Market Volatility This Week – CBOE VIX

This past week, the CBOE VIX measuring volatility ended at 18.33. The long-term average is approximately 19 to 20. The CBOE VIX measures the stock market’s expectation of volatility based on S&P 500 Index options. It is commonly referred to as the fear index.

Economic News This Week

Provided by Stock Rover*.

The US Energy Information Administration reported US commercial crude oil stockpiles increased by 4.1M barrels to 452.7M (4% above the five-year average) for January 27th. Crude oil refinery inputs averaged 15.0M barrels per day, a decrease of 19K bpd compared to the previous week’s average. Gasoline inventories increased by 2.6M barrels (7% below the five-year average) compared to the 1.8M barrels increase the last week. Gasoline inventories are currently at a ten-year low. Distillate inventories increased by 2.3M barrels (17% below the five-year average). Total commercial petroleum inventories increased by 1.6M barrels. Refineries operated at 85.7% of their operable capacity. Gasoline production increased, averaging 9.4M bpd, compared to 8.8M bpd the previous week. Distillate fuel production increased, averaging 4.7M bpd. Crude oil imports came in at 7.3M bpd, an increase of 1.4M bpd compared to the previous week. Crude oil imports averaged 6.6M bpd over the last four weeks, 1.0% more than the previous year’s period. Total motor gasoline imports (including finished gasoline and gasoline blending components) averaged 501K bpd, and distillate fuel imports averaged 313K bpd.

The Federal Open Market Committee (FOMC) announced raising its benchmark federal funds rate by 25 basis points, putting it in the range of between 4.50% and 4.75% — the highest level since October 2007. The move marked the eighth increase since March 2022 and followed a 50 basis point increase in December and four consecutive FOMC meetings ending with a 75 basis point climb. The FOMC statement acknowledged that “Inflation has eased somewhat but remains elevated .”The FOMC statement continued to mirror previous releases stating, “The Committee anticipates that ongoing increases in the target range will be appropriate to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time”. The FOMC did not release any new economic forecasts.

The U.S. Bureau of Labor Statistics reported a higher-than-expected 517,000 jobs were added as the unemployment rate fell to 3.4% in January, the lowest level in 53 years. November and December’s readings were revised up for a combined (+71K) additional jobs. The number of unemployed workers remained steady at 5.7 million. Seasonal adjustments likely contributed to the strong reading, as weak holiday season hiring may have resulted in fewer-than-normal layoffs in January. Job growth was broad-based, with leisure and hospitality adding (+128K) jobs, followed by professional and business services (+82K), government (+74K), health care (+58K), retail (+30K), construction (+25K), and manufacturing (+19K). There were 11 million job openings in December – about 1.9 for each person looking for a job. The labor force participation rate increased slightly to 62.4% from 62.3%, leaving it below the pre-pandemic level of 63.4%. Average hourly earnings increased by 0.3% in January. At $33.03, average hourly earnings are up 4.4% from a year ago.

Curated Weekend Reading From Around The Web

Portfolio Management and Investing

• Fed Raises Rates and Says It Isn’t Done Yet. We Think It Is. (Morningstar)
• Portfolio Optimization: linking performance to value (Credit Suisse)
• Seven Principles for successful long-term investing (J.P. Morgan)

Retirement

• Study Sheds Light on Cognitive Dissonance in Active Management (TEBI)
• It’s Time to Uncomplicate Your Health and Wealth (A Teachable Moment)
• Buffett Profile from 1979: “The investor’s investor” (Neckar’s Minds and Markets)

Financial Independence

• How Much House/Car Can I Afford (The Long Game)
• 11 Things That 0% Interest Rates Caused (Young Money)
• Avoiding Unhappiness (Humble Dollar)