Weekly Market Commentary – 4/7/2023

-Darren Leavitt, CFA

The holiday-shortened week saw low volumes in trading, where countercyclical sectors and US Treasuries were favored.  The week started with the announcement that OPEC + would cut oil production by 1.16 million barrels a day.  The news sent crude 7% higher, squeezing shorts and renewing calls that crude could top $100 a barrel in the next year.  Interestingly, the move to cut production comes after UBS’s takeover of Credit Suisse and may be seen as an initial consequence of how the takeover was managed.  The banking sector had a rough week after JP Morgan’s CEO Jamie Diamond suggested in his annual letter to shareholders that the regional banking crisis is not over and that there will be repercussions for years.

The S&P 500 gained 1.34%, the Dow added 1.1%, the NASDAQ climbed 0.62%, and the Russell 2000 gave back 2.66%.  US Treasuries were bid up across the curve, with the shorter tenors acting just a bit better.  The 2-year yield decreased twenty-five basis points to 3.81%, while the 10-year yield fell by twenty basis points to 3.29%.  The move in Treasuries came as economic data reported on the week was weaker than expected.  Oil prices rallied $5.32 or 7% on the OPEC+ cuts, closing at $80.70 a barrel.  Gold eclipsed the $2000 an Oz level, gaining $38.10 to close at $2024.80 an Oz.  Copper prices decreased by $0.06 to $4.02 an Lb.

Economic data reported for the week was softer than expected.  ISM Manufacturing posted its 5th consecutive contractionary reading of 46.3%, lower than the expected 47.5%.  ISM Non-Manufacturing also posted a weaker-than-expected figure of 51.2%.   JOLTS data showed job openings of less than 10 million (9.931M) for the first time since 2020. ADP employment showed fewer payrolls added than expected at 145k versus 205k.  Initial Claims ticked above 200k to 228k, and the prior week’s number was revised to 246k.  Continuing Claims increased to 1.823M from the preceding week’s 1.689m.  The Employment Situation Report was reported on Friday with the US equity markets closed.  Non-Farm Payrolls came in at 236k versus the consensus estimate of 240k, while Private Payrolls increased by 189k- the street was looking for an increase of 220k.  The Unemployment rate ticked lower to 3.5% from 3.6%, while Average Hourly Earnings increased by 0.3%, in line with the consensus forecast.

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