Stock Market This Week – 03/11/23

Stock Market This Week

Stock Market This Week – 03/11/23

In 2023, some good news is bad news for the stock market. The United States economy is in solid shape with continued job growth and low unemployment. In normal times, stock responds positively. But investors fear interest rate hikes in response to good economic news. Jobs grew another 311,000, and unemployment edged up to 3.6% in February 2023. As a result, the stock market sold off.

Also, Chairman Powell’s recent public statements have scared investors about more aggressive interest hikes. High inflation is down from its peak in June 2021 but still elevated. High interest rates are keeping mortgage rates high and home sales down.

Silicon Valley Bank

But it also caused the Silicon Valley Bank (SVB) to collapse this past week, making it the second biggest bank failure in the United States. Customers were withdrawing money to meet liquidity needs forcing SVB to sell U.S. Treasuries and mortgage-backed securities (MBS) at a loss. The bank could not raise capital to cover the loss, and customers started withdrawing money from the bank. Finally, the U.S. government regulators took over the bank and shut it down.

Stock Market Indices and Sectors

As shown by data from Stock Rover*, the major indices had a terrible week, with the Russell 2000, the Nasdaq, the S&P 500 Index, and the Dow Jones Industrial Average (DJIA) all down. The Russell 2000 performed the worst at (-8.0%). In addition, oil fell on fears of weaker demand. But the VIX spiked by nearly 24%.

All eleven sectors had negative returns for the week. The worst performing sector was Financial Services at (-9.3%) as investors exited the door on banks, brokerages, and other companies. Conversely, the best performing sectors were Consumer Defensive and Utilities, although they were still down.

The Nasdaq is performing the best for the year, followed by the Russell 2000 and the S&P 500. The Dow 30 is trailing with negative returns. In addition, 5 of the 11 sectors are up year-to-date. The three best-performing sectors are Technology, Consumer Cyclical, and Communication Services. The worst performing sectors are Energy, Healthcare, and Utilities. 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.

Category	YTD Return (%)
Dividend Kings	(-2.8%)
Dividend Aristocrats	(-2.5%)
Dividend Champions	(-2.5%)
Dividend Contenders	(-7.0%)
Dividend Challengers	(-1.3%)

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 20.64X, and the Schiller P/E Ratio is about 28.05X. 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 24.80. 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 that U.S. crude oil production will rise by 590,000 barrels per day (bpd) to 12.44 million bpd in 2023 and by another 190,000 bpd to 12.63 million bpd next year. Brent crude oil spot price is expected to fall from an average of $84/b in the second quarter of 2023 to $81/b in the fourth quarter – for an average of $83/b in 2023 and $78/b in 2024. High demand for crude oil is expected to limit downward pressure on crude oil prices through the second quarter of 2023.

The EIA raised its forecast for U.S. gasoline consumption in 2023 and 2024 by about 2% from last month’s prediction. In addition, the EAI predicted that an increase in gasoline in inventories, along with a drop in crude oil prices, will result in retail gasoline prices averaging near $3.20/gal in the fourth quarter of 2023, down more than 30 cents/gal from a year earlier, and to decrease further to average about $3.10/gal in 2024. U.S. natural gas consumption is expected to average 99.1 billion cubic feet in Q1 of 2023, down 5% from a year earlier. The Henry Hub natural gas spot price is forecast to average about $3 per million British thermal units (MMBtu) in 2023, down by more than 50% from 2022. The EAI had predicted $5/MMBtu in its January STEO.

Job Openings

The U.S Bureau of Labor Statistics Job Openings and Labor Turnover Survey, or JOLTS, reported 10.8 million job openings on the last day of January, 410,000 lower than December’s upwardly revised 11.2 million reading. Job openings have been reported above 10 million for eight consecutive months. Industries contributing to the decrease include construction (-240,000), accommodation and food services (-204,000), and finance and insurance (-100,000). Job openings increased in transportation, warehousing, and utilities (+94,000) and nondurable goods manufacturing (+50,000). The number of people who voluntarily left their jobs dropped (-207,000) to 3.9 million, the most significant drop since May 2022.

The number of people who quit their jobs for other opportunities made up 2.5% of the workforce in January, little changed from the previous month. Quits decreased in professional and business services (-221,000), educational services (-14,000), and federal government (-5,000). The number of hires increased slightly (+121,000) to 6.4 million in January. The hiring rate increased by 0.1% to 4.1%. There were 1.9 available jobs for each unemployed person in January. For CY 2022, there were 77.2M hires and 72.3M separations, resulting in a net employment gain of 4.9 M.

Jobs Report

The U.S. Bureau of Labor Statistics reported 311,000 jobs were added as the unemployment rate rose to 3.6% in February from 3.4% the previous month. December and January’s employment readings were revised for a combined (-34K) job. The number of unemployed workers dropped slightly to 5.1 million. Job gains were broad-based, with leisure and hospitality adding (+105K) jobs, followed by retail trade (+50K), government (+46K), professional and business services (+45K), and health care (+44K). Employment declined in information technology (-25K) and transportation and warehousing (-22K).

There were 10.8 million job openings in January – about 1.9 for each person looking for a job. The labor force participation rate increased slightly to 62.5% from 62.4%, leaving it below the pre-pandemic level of 63.4%. Average hourly earnings increased by 0.2% in February. At $33.09, average hourly earnings are up 4.6% from a year ago.

Curated Weekend Reading From Around The Web

Portfolio Management and Investing

• How Long Does It Take To Double Your Money (Of Dollars and Data)
• Why ws there a run in Silicon Valley Bank (Noahpinion)
• Are you Gambling or Investing? (Coffeehouse Investor)

Retirement

• Index Funds’ True Advantages (Morningstar)
• The “secret” to financial freedom? Persist when others quit (Vanguard)
• Is your credit card statement as clear as it should be? (Which?)

Financial Independence

• Family vs. Work: The Everlasting Struggle for Balance (Physician on FIRE)
• The Most Debated Personal Finance Topics (The Long Game)
• The Luckier You Are The Nicer You Should Be (Collab Fund)