Stock Market This Week – 03/25/23

Stock Market This Week

Stock Market This Week – 03/25/23

Despite another 0.25% increase by the United States Federal Reserve, the stock market had a positive week. Fears about a greater banking system collapse have abated. But overseas, megabanks may be under duress. Credit Suisse (CS) was taken over by UBS (UBS) in a deal brokered by the Swiss government. Also, Deutsche Bank (DB) is under pressure.

Oil Prices

Oil prices have plunged during the current banking crisis. Despite a rebound this week, they settled below $70 per barrel. At this level, inflation will likely trend lower, and the oil majors will have lower profitability. But stressed consumers will be relieved.

Stock Market Returns

As shown by data from Stock Rover*, the major indices had a positive week. The Nasdaq performed the best as mega-cap stocks continued their market leadership. Both Apple (AAPL) and Microsoft (MSFT) are up for the year. In addition, the S&P 500 Index, Dow Jones Industrial Average (DJIA), and the Russell 2000 were up for the week as banks and other stocks recovered.

In addition, oil prices increased. But the VIX plummeted nearly 16% as market volatility subsided.

Most sectors were up, with 9 of the 11 sectors having positive returns for the week. The Communication Services, Basic Materials, Energy, and Consumer Defensive sectors led the way. Conversely, the two worst-performing sectors were Utilities and Real Estate.

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

The dividend growth investing strategy has struggled with negative returns as banks and energy stocks declined. The table below shows their performance by category. All categories are now in positive territory.

Category	YTD Return (%)
Dividend Kings	(-2.7%)
Dividend Aristocrats	(-2.4%)
Dividend Champions	(-3.3%)
Dividend Contenders	(-4.0%)
Dividend Challengers	(-4.0%)

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 21.23X, and the Schiller P/E Ratio is about 28.36X. 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 21.74. 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*.

Existing Home Sales

The National Association of Realtors reported that existing home sales jumped 14.5% in February to a seasonally-adjusted annual rate of 4.48M, down (-22.4%) compared to February 2022. This is the most significant monthly percentage increase since July 2020 and follows twelve consecutive months of declines. “Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said NAR Chief Economist Lawrence Yun. Sales of single-family homes rose 15.3% to a 4.14M annual rate (-21.4% Y/Y), and existing condo sales increased to a 440K annual rate (-32.3% Y/Y). Total housing inventory was unchanged at 980K (+15.3% Y/Y).

Properties typically remained on the market for 34 days, up slightly from 33 days in January. Unsold inventory was reported at a 2.6-month run rate, down 10% from January but up from 1.7 months from February 2022. Fifty-seven percent of the homes sold in February were on the market for less than a month. The median sales price increased to $363,000 (-0.2% Y/Y). The median existing single-family home price was $367,500 in February (-0.7% Y/Y), while the median existing condo price was $321,000 (+2.5% Y/Y). Regionally the West (+19.4%) led the way, followed by the South (+15.9%), Midwest (+13.5%), and Northeast (+4.0%).

Federal Funds Rate

The Federal Open Market Committee (FOMC) announced raising its benchmark federal funds rate by 25 basis points, putting it in the range of between 4.75% and 5.00% — the highest level since October 2007. Fed policymakers voted unanimously to raise their benchmark interest rate. The move marked the ninth increase since March 2022 and follows a 25-basis point increase in February, a 50-basis point increase in December, and four consecutive FOMC meetings ending with a 75-basis point climb. The FOMC statement stated that “The Committee anticipates that some additional policy firming may be appropriate to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time“. The wording is a softened stance from the previous statements indicating “ongoing increases” would be appropriate to bring down inflation. 

The FOMC’s latest projections reduce growth over the near term while increasing inflation. The forecast reduced the annual GDP growth to 0.4% in 2023, 1.2% in 2024, and 1.9% in 2025. Inflation for headline/core is projected to be up slightly to 3.3% / 3.6% in 2023, 2.5% / 2.6% in 2024, and 2.1% / 2.1% in 2025. The median unemployment rate is predicted to be 4.5% in 2023 and 4.6% in 2024 and 2025. The median fed funds rate is expected to be 5.1% in 2023, 4.3% in 2024, and 3.1% in 2025.

Durable Goods Orders

In February, new orders for durable goods decreased (-1.0%) to $268.4B. This is the weakest reading since April 2020 and follows a downwardly revised (-5.0%) in January and a (+5.1%) increase in December. Total durable goods orders are up (+2.0%) year over year. Much of the decrease in the headline number is attributable to a (-2.8%) drop in orders for transportation equipment which has reported down three of the last four months – decreasing $2.6B to $89.4B. Orders for nondefense aircraft and parts fell (-6.6%), while orders for new cars fell (-0.9%). Electrical equipment, appliances, and components orders rose (+1.0%). 

Excluding the steep decline in orders for transportation equipment, “core” durable goods orders were flat and followed a downwardly revised (+0.3%) in January and (-0.4%) in December. New orders for capital goods decreased (-2.2%) as nondefense orders dropped (-1.2%). Defense capital goods orders dropped (-7.4%). Shipments of manufactured durable, down two consecutive months, decreased (-0.6%) to $274.8B. Transportation equipment drove the decrease down (-1.4%) to $90.1B.

Curated Weekend Reading From Around The Web

Portfolio Management and Investing

• Why You Always Sell Your Stocks at the Bottom (Darius Foroux)
• How many banks are in danger? (The Grumpy Economist)
• An Open Letter to Every Company in Tech (Investment Talk)

Retirement

• Staying Invested (Spilled Coffee)
• Let’s Go Exploring! Slovenia (Millenial Revolution)
• The Mystery Millionaire of Gage Park (Chicago)

Financial Independence

• There’s a reason some of us find it easier to change (Psyche)
• FI Frugal Hobbies (Choose FI)
• What is Financial Freedom (Slightly Early Retirement)