Stock Market This Week
Stock Market This Week – 05/20/23
The stock market is seemingly shrugging off fears of a default on the United States debt. Although negotiations are progressing between the two sides, no guarantee exists they will compromise and come to an agreement and raise the debt ceiling.
That said, the bond market is reacting, and the cost to insure against a U.S. default is skyrocketing. According to the N.Y. Times, credit default swaps view U.S. debt as “riskier than countries like Bulgaria, Croatia, Greece, Mexico and the Philippines. Compared with Germany, the cost of insuring U.S. debt is about 50 times more.”
Although the default risk is low, the consequences are still being determined because the U.S. has never defaulted on its debt in modern times. But hypothetically, government salaries won’t be paid; Social Security checks may not go out, debt payments may be missed, etc. As a result, the United States’ credit rating may be lowered, like in 2011, when the administration and Congress had a protracted battle over the debt ceiling.
Stock Market Overview
The stock market had a positive week.
As shown by data from Stock Rover*, all the major indices increased this week. The Nasdaq performed best, followed by the Russell 2000, the S&P 500 Index, and the Dow Jones Industrial Average (DJIA).
Seven of the 11 sectors had positive returns for the week. Technology, Financial Services, and Communication Services were the top three sectors for the week. But the Consumer Defensive, Real Estate, and Utilities sectors performed worst.
Oil prices rose 2.3% to $71+ per barrel, reversing its downward trend. The VIX plunged and is below the long-term average. Gold declined to below $2,000 per ounce.
The Nasdaq is performing the best for the year, followed by the S&P 500 Index, Russell 2000, and the Dow 30. Notably, the Nasdaq is in a bull market. In addition, 6 of the 11 sectors are up year-to-date. The three best-performing sectors are Technology, Communication Services, and Consumer Cyclical. But the worst-performing sectors are Financial Services, Utilities, and Energy.
Click here to sign up for your free credit score.
The dividend growth investing strategy has put in mixed returns as banks and energy stocks declined but is bouncing back. The table below shows their performance by category. Two of the five categories are in positive territory.
|Category||YTD Return (%)|
Live Oak is an FDIC-insured bank built to serve small businesses. In addition to being the nation’s top SBA lender, Live Oak offers high-yield business savings accounts and small business checking accounts built for the self-employed.
- Designed with simplicity for newly formed businesses, solopreneurs, gig-workers, freelancers, and side-hustlers.
- Deposit checks, pay bills, initiate wire transfers online – whenever, wherever.
- Over 55,000 free ATMs nationwide.
- 4.00% APY.
- Simply fund your account by linking and transferring from an existing bank account.
- FDIC insured up to $250,000 per depositor for each account ownership category.
Click here to sign up for business checking, business savings, or personal savings.
Stock Market Valuation This Week
The S&P 500 Index trades at a price-to-earnings ratio of 24.27X, and the Schiller P/E Ratio is about 29.38X. 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.
Economic News This Week
Provided by Stock Rover*.
The Commerce Department reported advance U.S. retail and food services sales rose 0.4% to $686.1B in April; this follows March’s revised (-0.7%) and February’s (-0.4%) readings. Retail sales, adjusted for seasonal shifts but not inflation, were up (+1.6%) year over year. In addition, total sales from February 2023 through April 2023 were up (+3.1%) year over year. Much of the sales rebound is attributable to increases in spending for motor vehicles & parts (+0.4%) and internet retailers (+1.2%). In addition, miscellaneous store retailers (+2.4%), health & personal care (+0.9%), general merchandise (+0.9%), and restaurants (+0.6%) all saw sales increases. On the other hand, sales at sport & hobby (-3.3%), gas stations (-0.8%), home furnishings (-0.7%), and electronics & appliances (-0.5%) all saw decreases.
Excluding autos and gasoline, sales were up (+0.6%) for the month. Excluding autos, sales increased (+0.4%). Core retail sales, a measurement that excludes spending on autos, gasoline, building materials, and food services, increased (+0.7%) in April after decreasing (-0.3%) in March and rising (+0.5%) in February and (+2.3%) in January.
Building Permits and Starts
The U.S. Census Bureau reported new residential building permits were down 1.5% in April to a seasonally adjusted 1.416M (-21.1%) below the April 2022 rate of 1.795M. However, single-family permits were up a seven-month high (+3.1%) to 855K, from a revised March figure of 829K. In addition, new residential building permits increased in the South (+4.3%) and West (+3.8%), while the Northeast (-23.6%) and Midwest (-15.2%) posted declines.
Privately-owned housing starts were up (+2.2%) to 1.401M, (-22.3%) below the April 2022 rate of 1.803M. Single-family starts increased (+1.6%) to 846K, as single-family homebuilding increased in the West (+59.5%). The Midwest (-20.5%), Northeast (-10.3%), and South (-6.1%) all saw single-family starts fall. Privately-owned housing completions reported at 1.375M, down (-10.4%) from a revised March figure of 1.534M, up slightly (+1.0%) over April 2022. Single-family housing completions were reported at a 15-month low of 971K, a (-6.5%) decrease from the revised March rate of 1.039M, down (-5.2%) from March 2022.
Philadelphia Fed Manufacturing Index
The latest report from the Philadelphia Federal Reserve indicated the Philadelphia Fed Manufacturing Index increased to -10.4 in May, up from a nearly three-year low of -31.3 the prior month. The index rates the relative level of general business conditions in the Philadelphia region, with a level above zero indicating expansion and below zero indicating contraction. The index is also widely followed as an indicator of conditions throughout the U.S. This is the ninth straight negative reading and the eleventh in the last twelve months.
The report also showed that manufacturing activity continued to decline overall, with new orders and shipments remaining negative and employment declining. The index for current new orders rose 14 points to -8.9, the current shipments index rose 3 points to -4.7, and the future employment index rose 9 points to 12.6. The price indexes remained below long-run averages, with prices received declining 4 points to -7.0. Future indexes reflected muted expectations for growth, with the future general activity index falling 9 points to -10.3. Almost 37% of the firms surveyed expected decreased activity over the next six months. The future new orders index dropped from 9.8 to -2.3, and the future shipments index sank from 13.3 to 4.5.
- Stock Market Holidays
- Investor Relations Guides
- Checking and Savings Account Resources
- Dividend Investing Resources
Curated Weekend Reading From Around The Web
Portfolio Management and Investing
- What’s the Best-Performing Asset Type During a Recession (Morningstar)
- How Does Gold Perform With Inflation, Stagflation, and Recession? (Institutional Investor)
- 70 Experts Share the Most Important Lesson They Would Teach Average Investor (Excess Returns)
- Three Lessons From the 60/40 Portfolio’s Stumble (Morningstar)
- A look back and forward at active funds (Vanguard)
- Stick with what works and fiddle with what doesn’t (Klement on Investing)
- Free to Be (Humble Dollar)
- There’s a reason some of us find it easier to change than others (Support Psyche)
- Charting the Numner of Failed Crypto Coins by Year (Visual Capitalist)
Here are my recommendations:
- Simply Investing Report & Analysis Platform or the Course can teach you how to invest in stocks. Try it free for 14 days.
- Sure Dividend Pro Plan is an excellent resource for DIY dividend growth investors and retirees. Try it free for 7 days.
- Stock Rover is the leading investment research platform with all the fundamental metrics, screens, and analysis tools you need. Try it free for 14 days.
- Portfolio Insight is the newest and most complete portfolio management tool with built-in stock screeners. Try it free for 14 days.
Receive a free e-book, “Become a Better Investor: 5 Fundamental Metrics to Know!” Join thousands of other readers !
*This post contains affiliate links meaning that I earn a commission for any purchases that you make at the Affiliates website through these links. This will not incur additional costs for you. Please read my disclosure for more information.
Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.