Stock Market This Week – 03/04/23

Stock Market This Week

Stock Market This Week – 03/04/23

After some poor inflation data brought the bears out of hiding last week, the stock market finished strong this week. Tech stocks recovered some but not all of their losses. Despite fears of further interest rate hikes by the U.S. Federal Reserve, job growth remains strong and unemployment low. The exception is tech companies, which are laying off workers.

As shown by data from Stock Rover*, the major indices had a solid week, with the Russell 2000, the Nasdaq, the S&P 500 Index, and the Dow Jones Industrial Average (DJIA) rising. The Nasdaq performed the best as tech stocks rebounded. In addition, oil rose on higher demand, and the VIX sank.

Nine of the eleven sectors rose for the week, while two decreased. The Basic Materials, Energy, and Industrials sectors rose. The Utilities sector performed the worst, followed by the Communication Defensive sector. 

The Nasdaq is performing the best for the year, followed by the Russell 2000 and the S&P 500. The Dow 30 is trailing, unlike 2022. In addition, 8 of the 11 sectors are up year-to-date. The three best-performing sectors are Consumer Cyclical, Technology, and Communication Services. Only more defensive sectors, like Healthcare, Utilities, and Consumer Defensive, are down. Utilities are the worst-performing sector on fears of higher interest rates.

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 February 2023. As a result, the number of companies on the list has risen to 616. 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.

Six new additions indicate companies are starting to experience headwinds in February 2023.

Stock Market Valuation This Week

The S&P 500 Index trades at a price-to-earnings ratio of 21.63X, and the Schiller P/E Ratio is about 29.38. 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 18.49. 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*.

New Orders

In January, new orders for durable goods decreased (-4.5%) to $272.3B. This is the weakest reading since April 2020 and follows a (+5.1%) increase in December and a (-1.8%) decrease in November. Total durable goods orders are up (+3.0%) year over year. Much of the decline in the headline number is attributable to a (-13.3%) drop in orders for transportation equipment which sank $14.2B to $92.8B. Orders for nondefense aircraft and parts fell (-54.6%). Orders for new machinery were up (+1.6%), as were computers and electronics (+0.5%). Automobile makers reported a slight (+0.2%) bump in new orders.

Excluding the steep decline in orders for transportation equipment, “core” durable goods orders rose (+0.7%), the best reading since March 2022, and follows readings of (-0.4%) and (0.0%) for the previous two months. New orders for capital goods decreased (-12.8%) as nondefense orders dropped (-15.3%). Excluding defense, new orders decreased (-5.1%). Shipments of manufactured durable goods fell (-0.1%) to $277.2.2B after 16 consecutive months of increases. Transportation equipment drove the decrease down (-1.7%) to $92.2B.

Consumer Confidence

The Conference Board’s Consumer Confidence Index® decreased in February to 102.9 (1985=100), down from January’s downwardly revised 106.0 reading. This marks two consecutive monthly declines. Based on consumers’ short-term outlook for income and business, the Expectations Index fell to 69.7 from 76.0 the previous month. A reading of 80 tends to signal a recession within a year. The index has been below 80 for 11 of the last 12 months. “Consumer confidence declined again in February. The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more,” said Ataman Ozyildirim, Senior Director, Economics at The Conference Board.

Consumers’ assessment of the current business climate declined, with 17.8% of respondents indicating that business conditions were “good,” down from 19.9% in January. The Present Situation Index, based on consumers’ sentiment toward current business conditions and the labor market, increased to 152.8 from 151.1 the previous month as 52.0% of consumers said jobs were “plentiful,” up from 48.1%. Consumers were pessimistic about the short-term business condition, with 14.2% of people expecting them to improve, down from 18.4% in January.

Manufacturing PMI

The ISM® (Institute for Supply Management®) Manufacturing PMI® reported at 47.4% for January as business activity fell one percentage point from the previous month. This marks the second contraction after 30 consecutive months of expansion. A value below 50% is indicative of a shrinking economy. “With Business Survey Committee panelists reporting softening new order rates over the previous nine months, the February composite index reading reflects companies continuing to slow outputs to better match demand for the first half of 2023 and prepare for growth in the second half of the year,” said Timothy Fiore, chairman of the ISM® Manufacturing Business Survey Committee.

The Manufacturing PMI® figure is now at its lowest level since May 2020, when it registered 43.5%. Only Transportation Equipment reported growth in February of the six biggest manufacturing industries. The index for new orders contracted for the fifth month, reaching its lowest level since the pandemic, declining 2.6 percentage points to 42.5%. The Prices Index, which measures what companies pay for raw materials and other supplies, rose 5.1 percentage points to 44.5%. The Backlog of Orders Index increased 2.0 percentage points to 43.4% and has now contracted for four consecutive months following 27 months of expansion. While still in expansion territory, the Employment Index declined 0.2 percentage points to 50.6% after increasing for two straight months.

Curated Weekend Reading From Around The Web

Portfolio Management and Investing

• Do Stocks Always Outperform Bonds? (Verdad)
• Strong data could push U.S. recession down the road (Vanguard)
• Microsoft vs. Google: AI war explained (Joma Tech – YouTube)

Retirement

• Charlie Munger: Active managers in ‘extreme denial’ about lagging index returns. ETF Stream
• Beware of low volatility portfolios (Advisor Perspectives)
• How to “Die with Zero” – The Math Behind the Mindset (Money Flamingo)

Financial Independence

• Would you prefer a four-day working week? (University of Cambridge)
• 100 centenarians’ 100 tips for a life well lived (The Guardian)
• Can a water meter save you money (be clever with your cash)