Stock Market This Week – 02/11/23

Stock Market This Week

Stock Market This Week – 02/11/23

The stock market had a down week as investors digested jobs and economic news. In the topsy-turvy world of investing during the U.S. Federal Reserve’s tightening, good financial news means down market days and vice versa. Investors are waiting for a sign that the Fed will pivot or stop raising interest rates. The day will eventually come, but it may be in the latter half of 2023.

As shown by data from Stock Rover*, all the major indices had negative returns, with the Dow Jones Industrial Average (DJIA) performing the best. The Russell 2000 and the Nasdaq had the worst weekly returns, with the S&P 500 Index in the middle. Oil soared, and the VIX rose. But the VIX is still near its long-term average.

Ten of the eleven sectors again posted losses for the week. The Communication Services sector performed the worst, followed by the Consumer Cyclical and Basic Materials sectors. Only the Energy sector had a positive return.

The Nasdaq is performing the best for the year, followed by the Russell 2000. But all the major indices are up with the Dow 30 trailing. In addition, all 8 of the 11 sectors are up year-to-date. The three best-performing sectors are Consumer Cyclical, Communication Services, and Technology. Only more defensive sectors, like 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 22.86X, and the Schiller P/E Ratio is about 29.71. 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 20.53. 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*.

Energy Outlook

The U.S. Energy Information Administration (EIA), in its February 2023 Short-Term Energy Outlook (STEO), expects natural gas consumption to be below average due to the warmer-than-expected January. Natural gas prices at the Henry Hub are forecast to average $3.40 per million British thermal units in 2023, a significant drop from January’s $5.00/MMBtu prediction. EIA projects dry gas production to rise to 100.27 billion cubic feet per day (bcfd) in 2023 and 101.68 bcfd in 2024 from a record 98.09 bcfd in 2022. Domestic gas consumption is expected to fall to 87.04 bcfd in 2023 and 86.10 bcfd in 2024 from 88.63 bcfd in 2022.

Brent crude oil prices are projected to decline in the year’s second half to an average of $82 per barrel from $85 per barrel in the first half as production is anticipated to outpace demand. EIA forecasts that crude oil production will increase by 590K barrels per day (bpd) to 12.49 million (bpd) in 2023 and by another 160K bpd to 12.65 million bpd in 2024.

Coal production is estimated to decline by 13% to 518 million short tons (MMst) in 2023, with another 5% decline to 494 MMst in 2024. Reducing coal consumption by the electric power plants and lowering natural gas prices drive the fall. U.S. coal exports are expected to increase by about 2% in 2023 and 9% in 2024, mainly to supply rising demand in Asia and Europe.

Fed Chair Jerome Powell

Fed Chair Powell spoke at The Economic Club of Washington, D.C., and said, “The disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector, which is about a quarter of our economy. But it has a long way to go. These are the very early stages.” Powell indicated that, except for housing, the services sector is not showing signs of disinflation. That future rate increases are a certainty, and the January jobs report indicates that it’ll take some time to get things under control.

Powell also said, “We expect 2023 to be a year of significant declines in inflation. It’s actually our job to make sure that that’s the case,” he also stated, “…with PCE inflation running at about 5.0%… core at about 4.4% my guess is it will take certainly into not just this year, but next year to get down close to 2%.”. The Fed Chair also talked about the labor market, indicating that the demand for workers is about 5 million greater than the supply, saying that “this was not the case before the pandemic” and that the “shortage of workers is structural rather than cyclical.”

Jobless Claims

The Labor Department reported an increase in initial jobless claims for the week ending February 4th. The seasonally adjusted initial claims reported at 196,000, an increase of 13,000 from the previous week’s unrevised level. The four-week moving average, which smooths out volatility was 189,250, a decrease of 2,500 from the last week’s average. This is the lowest level since April 2022. On an unadjusted basis, claims rose 9,628 (or 4.3%) to 234,654. There were 230,740 initial claims for the comparable week in 2022. Of the 53 states and U.S. territories that report jobless claims, 25 reported increases, and 28 reported declines. California (+7,579) led with the most significant increase in initial claims, followed by Ohio (+3,419) and Illinois (+1,561). Georgia (-1,665), New Jersey (-1,440), and Texas (-1,062) saw the most decrease.

For the week ending January 28th, the number of people continuing to claim unemployment, also known as the insured unemployment rate, was 1.2%, an increase of 0.1% from the prior week. Continuing claims reported at 1.688M, up 38,000 from the previous week’s downwardly revised level. For the week ending January 21st, 1.942M people were receiving jobless benefits through state or federal programs, an increase of 52,388 from the previous week’s level. There were 2.238M weekly claims filed for the comparable week in 2022.

Curated Weekend Reading From Around The Web

Portfolio Management and Investing

• Why is Gold Valuable? (Of Dollars and Data)
• Are ETFs Killing Future Stock Market Returns? (Trillions – Podcast)
• Mapped: GDP Growth Forecasts by Country in 2023 (Advisor Channel)

Retirement

• The 60/40’s Annus Horribilis (CAIA Association)
• Are We in a Low Return World (Morningstar)
• Retirement Catch-Up Contributions – It’s Not Too Late (Physician on FIRE)

Financial Independence

• Here’s What Actually Makes for a Happier Life (The Conversation)
• There is No Such Thing as Perfect (Accidently Retired)
• Perfect is the Enemy of Good (A Wealth of Commons Sense)