Good Life Advisors – Talking Points – Week 18        

The May FOMC meeting ended with a 25 bp rate hike to 5.0-5.25%, as expected in a unanimous decision this week. The policy statement eliminated some of the forward guidance language, instead focusing on data dependence. Chair Powell said that if the inflation forecast plays out as expected, it wouldn’t be appropriate to cut rates (higher for longer). Powell also said a decision on a pause was not made at the meeting and reiterated that the Fed would be data dependent, though said in principle, conditions suggest the Fed won’t have to raise rates as high. While economists said takeaways leaned hawkish, the latest regional banking turmoil pushed the odds of a June 25 bp hike back down near 0%. Futures are also showing a year-end median fed funds rate of 4.35%, suggesting between two-to-three cuts by December.

With 85% of S&P 500 companies having reported, earnings continued to outperform. The latest FactSet Earnings Insightsaid earnings growth is down 2.2% q/q, though up from -3.7% last week and the -6.7% estimate at the end of the quarter, on pace to record the biggest outperformance to analyst expectations since Q4 21’. Apple was a standout after reporting stronger revenues than expected and announcing a $90B buyback. Some other key themes from the latest batch of earnings included continued corporate pricing power, efficiency and cost-savings initiatives, easing supply chain and input price pressures and ongoing travel strength.

Friday’s April payrolls report came in hotter than expected, with the headline print of 253K, well ahead of estimates and the unemployment rate falling to 3.4%, a fresh five-decade low. Average hourly earnings were also hotter, with monthly pay gains firmest since Mar-22. However, the prior two months saw a fairly substantial downward revision, offering mixed signals around the Fed rate path. Over the first four months of the year, the monthly average is 180k, down substantially from last year’s average of 385k per month. The payroll gain came after this week’s March JOLTS report showed a larger-than-expected decline in job openings, which suggested some support for the soft landing narrative as the labor market appears to be softening without any meaningful loss of jobs. This week’s April ISM Manufacturing index came off a three-year low in March, though was in contraction territory for a sixth-straight month

Regional banks were again the big corporate story after First Republic, with JPM -1.1% taking on the bank in a deal announced on Sunday. The rescue did little to alleviate regional bank angst, however, with ongoing fears around deposit/liquidity concerns, no signs of expanding deposit insurance, CRE, capital return constraints, and potential credit implications surrounding a more pronounced growth slowdown. However, some analysts have said that short positioning in the group is extremely crowded, which could set up a squeeze.

US equities were mostly lower this week as the S&P gave back last week’s gains. However, the absolute change of the S&P index was less than 1% for a fifth-straight week, while Nasdaq edged out a slight gain. Energy was the big sector laggard, though other underperformers included regional banks, money center banks, investment banks, insurance, credit cards, telecom, drug stores, tobacco, cosmetics, industrial metals, fertilizer, media and entertainment, internets, tech hardware, specialty retail, and apparel. The FANMAGs were mixed, while outperformers included biotech, food and beverage, autos, cruise lines, semis, road and rail, and building materials. Treasuries were mixed with the curve steepening as the 2Y moved back below 4%. The dollar index was down 0.4%. Gold finished the week up 1.3%. Bitcoin futures were up around 1.7%, holding under $30K. WTI crude was down 7.1% for the week, though well off worst levels after a Friday rally.

Stocks finished off the week’s lows with some push and pull from a number of factors. The bullish narrative continues to center around Fed pause signaling, earnings and margin strength, consumer resiliency, labor markets holding up amid the rate hike cycle, disinflation momentum, and some dampened fears (by the week’s end) around regional banks. However, growth fears were a key overhang this week, reflected in the latest bout of bank stress and weak energy/commodity performance. Bond market signaling continued to reflect recession risk and a quick Fed pivot, with the 3M/10Y spread falling below 150 bp for a fresh low. Some other bearish narratives include weakening manufacturing data, debt ceiling risks, the risk of a higher-for-longer Fed amid hotter wage growth and sticky services prices, weak market breadth, and weakening China reopening momentum.

Fixed Income

Yield Curve


May FOMC Statement   March Fed Minutes     Balance Sheet Reduction Plan       Credit, Liquidity and Balance Sheet    Federal Reserve Dot Plots yields    FOMC Policy Normalization Statement     Longer- Run Goals Jan 2022


Foreign Exchange Market

Energy Complex

The Baker Hughes rig count was down by 7 this week. There are 748 oil and gas rigs operating in the US – Up 43 over last year.

Metals Complex

Gold back above $2,000/ounce.

Employment Picture 

Weekly Unemployment ClaimsReleased Thursday, 4/27/2023 – The week ending April 29th observed an increase of 16k in initial claims increasing to 242k. The four-week moving average of initial jobless claims rose by 3k to 239k.

March Jobs Report – BLS Summary – Released 4/7/2023  The US Economy added 236k nonfarm jobs in March and the Unemployment rate was little changed at 3.5%. Average hourly earnings increased 9 cents to $33.18.  Hiring highlights include +72k Leisure and Hospitality, +65k Education and Health Services, +47 Government, and +39k Professional and Business Services.

  • Average hourly earnings increased 9 cents/0.3% to $33.18.
  • U3 unemployment rate was little changed at 3.5%. U6 unemployment rate decreased 0.1% to 6.7%.
  • The labor force participation rate was little changed at 62.6%.
  • Average work week decreased by 0.1 to 34.4 hours.

Job Openings & Labor Turnover Survey JOLTS Released 4/4/2023 – The number of job openings decreased to 9.9 million on the last business day of February, the U.S. Bureau of Labor Statistics reported. Over the month the number of hires and total separations changed little at 6.2 million and 5.8 million, respectively. Within separations, quits (4.0 million) increased and layoffs and discharges (1.5 million) decreased.

Employment Cost Index – Released 1/31/2023  Compensation costs for civilian workers increased 1.0% for the 3-month period ending in December 2022. The 12-month period ending on December 2022 saw compensation costs increase by 5.1%. The 12-month period ending December 2021 increased 4.0%. Wages and salaries increased 5.1 percent over the year and increased 4.5 percent for the 12-month period ending in December 2021. Benefit costs increased 4.9 percent over the year and increased 2.8 percent for the 12-month period ending in December 2021. This report is published quarterly.


This Week’s Economic Data

Links take you to the data source  

Consumer Credit  Released 4/7/2023 Consumer credit increased at a seasonally adjusted annual rate of 5.4 percent during the first quarter. Revolving credit increased at an annual rate of 12.3 percent, while nonrevolving credit increased at an annual rate of 3.1 percent. In March, consumer credit increased 6.6 percent. 

U.S. Construction Spending – Released 5/1/2023  Construction spending during March 2023 was estimated at a seasonally adjusted annual rate of $1,844.7 billion, 0.3 percent above the revised February estimate of $1,829.6 billion. The March figure is 3.8 percent above the March 2022 estimate of $1,768.2 billion 

U.S. Trade Balance  Released 5/4/2023 –  The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $64.2 billion in March, down $6.4 billion from $70.6 billion in February, revised. March exports were $256.2 billion, $5.3 billion more than February exports. March imports were $320.4 billion, $1.1 billion less than February imports. The March decrease in the goods and services deficit reflected a decrease in the goods deficit of $6.4 billion to $86.6 billion and a decrease in the services surplus of less than $0.1 billion to $22.4 billion.

PMI Manufacturing Index – Released 5/3/2023 – The April Manufacturing PMI® registered 47.1 percent, 0.8 percentage points higher than the 46.3 percent recorded in March. Regarding the overall economy, this figure indicates a fifth month of contraction after a 30-month period of expansion. The New Orders Index remained in contraction territory at 45.7 percent, 1.4 percentage points higher than the figure of 44.3 percent recorded in March. The Production Index reading of 48.9 percent is a 1.1-percentage point increase compared to March’s figure of 47.8 percent.

PMI Non-Manufacturing Index – Released 5/5/2023 – Economic activity in the services sector expanded in April for the fourth consecutive month as the Services PMI® registered 51.9 percent, 0.7 percentage point higher than March’s reading of 51.2 percent. The composite index indicated growth in April for the fourth consecutive month after a reading of 49.2 percent in December, the first contraction since May 2020.


Recent Economic Date

Links take you to the data source 

Chicago PMI  Released 4/28/2023 – Chicago PMI remained in contraction territory but increased in April to 48.6 points up from 43.8 points in February. This marks eight months in contractionary territory.  

US Light Vehicle Sales Released 4/28/2023  U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 14.838 million units in March. 

Personal Income – Released 4/28/2023  Personal income increased $67.9 billion (0.3 percent) in March, according to estimates by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $71.7 billion (0.4 percent) and personal consumption expenditures (PCE) increased $8.2 billion (less than 0.1 percent). The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.3 percent. Real DPI increased 0.3 percent in March and Real PCE decreased less than 0.1 percent; goods decreased 0.4 percent and services increased 0.1 percent.

Advance Estimate of 1th Quarter 2023 GDP  Released 4/27/2023 – Real gross domestic product (GDP) increased at an annual rate of 1.1 percent in the first quarter of 2023, according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.6 percent. The increase in real GDP reflected increases in consumer spending, exports, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased

Durable Goods – Released 4/26/2023  New orders for manufactured durable goods in March were up $8.6 billion or 3.2 percent to $276.4 billion, this followed two consecutive monthly decreases; excluding transportation, new orders increased 0.3 percent. Excluding defense, new orders increased 3.5 percent. The march increase was mostly a result of stronger transportation equipment purchases. 

New Residential Sales – Released 4/25/2023 – Sales of new single‐family houses in March 2023 were at a seasonally adjusted annual rate of 683,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.  This is 9.6 percent above the revised February rate of 623,000 but is 3.4 percent below the March 2022 estimate of 707,000 

Consumer Confidence  Released 4/25/2023 – The Conference Board Consumer Confidence Index® fell in April to 101.3, down from 104.0 in March. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased to 151.1 from 148.9 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell to 68.1 from 74.0. The Expectations Index has now remained below 80—the level associated with a recession within the next year—every month since February 2022, with the exception of a brief uptick in December 2022. The survey was fielded from April 3—about three weeks after the bank failures in the United States—to April 19.

Existing Home Sales  Released 4/20/2023 – Existing home sales decreased in March. Sales decreased 2.4% to a seasonally adjusted rate of 4.44 million in March. Sales decreased 22.0% year-over-year. Housing inventory sits at 980k units. Up 1.0% over February. Up 5.4% over last year. Unsold inventory sits at a 2.6-month supply. The median existing home price for all housing types was $375,700 which is down 0.9% from March 2022.  

Housing Starts – Released 4/18/2023 – New home starts in March were at a seasonally adjusted annual rate of 1.420 million; down 0.8% below February, and 17.2% below last March’s rate. Building Permits were at a seasonally adjusted annual rate of 1.413 million, down 8.8% compared to February, and down 24.8% over last year. 

Industrial Production and Capacity Utilization  Released 4/14/2023  In March, Industrial production increased 0.4%. Manufacturing decreased 0.5%. Utilities output increased 8.4%. Mining output declined 0.5%. Total industrial production was 0.5% higher in March than a year ago.  Total capacity utilization increased in March to 79.8% which is 0.1% above its long-run average.

Retail Sales  Released 4/14/2023 – U.S. retail sales for March decreased 1.0% to $691.7 billion but retail sales are 2.9% above March 2022.  U.S. retail sales for the January 2022 through March 2023 period were up 5.4% from the same period a year ago. 

Producer Price Index – Released 4/13/2023 – The PPI for final demand decreased 0.5 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported. Final demand prices were unchanged in February and increased 0.4 percent in January. On an unadjusted basis, the index for final demand increased 2.7 percent year over year.

Consumer Price Index – Released 4/12/2023 – Consumer prices increased 0.1% m/m in March, following a 0.4% increase in February. Consumer prices are up 5.0% for the 12-month period ending in March. Core consumer prices increased 0.4% m/m in March.

Data Sources:

Bureau of Economic Analysis (BEA)
Congressional Budget Office (CBO)
U.S. Bureau of Labor Statistics (BLS)
Federal Reserve Economic Data (FRED Charts)

CME Fed Watch
U.S. Treasury – Yields
U.S. Census Bureau
Institute for Supply Management (ISM)
Weekly DOL Employment Data
BLS Monthly Jobs Report

US Energy Admin (EIA)
BLS Consumer Price Index CPI
BLS Producer Price Index PPI
Atlanta Fed GDPNOW
NY Fed Nowcast GDP
US Census Bureau Housing Starts

Consumer Credit
USCB Retail Sales
Construction Spending
Federal Reserve Dot Plots
NY Empire Index
Philadelphia Federal Reserve
P/E Ratio Data -Yardeni Research

Technical Analysis Info: – Financial Charts
Exponential vs Simple moving average

Other Links:

1973 Arab Oil Embargo
Hunt Brothers Silver
Long-Term Capital bailout



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