Equities were higher overall for the first week of 2023. The first week of trading in 2023 carried the all too familiar theme of “up-one-day-down-the-next” from 2022 into the new year.
During the week, the release of the Fed’s minutes from its December meeting showed that members were resolved in maintaining their hawkish stance. The committee members especially noted concern over wage growth and how that could keep inflation high in their view. This drove continued fears that the Fed has a long runway to continue hiking rates. However, on Friday, we got a strong final jobs report for 2022 that sparked a relief rally. In that report, wage growth was shown to have declined in December. In fact, wage growth was the lowest since August of 2021.
This data caused investors to once again hope that rate hiking is closer to an end. After being down much of the week, equities rallied more than 2% on Friday.
We would caution on too much excitement just yet. The rest of the economic data from last week was mixed. Jobless Claims were the lowest since early October of last year. The JOLTs data showed job openings are still high and employers are looking to hire, as opposed to laying off workers. And yet, manufacturing data is still weak, factory orders were down, and vehicle sales were lower in 2022. The CPI data will be key this week, as a potentially 6th consecutive month of declines would bode well for equities.
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