Last Week in Review – December 23, 2022

December 27, 2022

Last Week In Review

Last week major indexes were mixed in generally quiet holiday season trading. The Dow Jones Industrial Average and S&P MidCap 400 Index recorded modest gains, while the Nasdaq Composite dropped nearly 2% despite recording its best daily gain since November on Wednesday. Energy stocks outperformed as U.S. oil inventories came in well below consensus expectations. Consumer discretionary shares performed worst, dragged lower by a steep decline in Tesla following the electric vehicle maker’s announcement of increased price discounts. Semiconductor stocks also sold off on Thursday after chipmaker Micron Technology reported falling global demand. Bond trading closed early on Friday, and both equity and bond markets were set to be closed Monday in observance of the Christmas holiday.

Last week, hawkish comments from the Federal Reserve and other global central banks continued to be a key factor weighing on markets. In particular, stocks wavered on Monday after former New York Fed President William Dudley told Bloomberg Television that optimistic markets could only result in the central bank tightening more aggressively.

US – Markets & Economy

Some of last week’s economic signals may have intensified fears of future rate hikes. Last Thursday, the Commerce Department upped its estimate of economic growth in the third quarter from 2.9% to 3.2%, boosted by upward revisions in healthcare spending and investment in equipment and intellectual property.

Meanwhile, weekly jobless claims surprised modestly on the downside, and continuing claims recorded their first weekly drop since October. Personal incomes rose 0.4% in November, a tick above expectations. Still, spending rose only 0.1%—remaining roughly flat in inflation-adjusted terms—as Americans cut back on autos and other goods purchases. The personal consumption expenditure (PCE) price index also rose 0.1% in November, bringing its year-over-year increase to 5.5%, the lowest since October 2021 and perhaps contributing to a mid-morning rally on Friday. The 12-month rise in the core (less food and energy) PCE index—considered the Fed’s preferred inflation gauge—fell to a four-month low of 4.7%.

Consumer resilience was mirrored in the Conference Board’s index of consumer confidence, which reversed two months of declines and came in at 108.3, much higher than expected and its best level since April. However, the research institute noted that its expectations index remained around 80, typical of recession levels.

Housing data were mixed, with existing home sales falling slightly less than expected in November but new home sales rising 5.8% and defying consensus expectations of a roughly 4.7% drop. However, forward-looking data were more negative as building permits plummeted 10.6% and hit their lowest level since June 2020. Durable goods orders contracted 2.1% in November, their biggest drop since April 2020, but the decline was driven by an unexpected plunge in highly volatile aircraft orders.

US – Equity Market Performance

Index Friday’s Close Week Ending 12/23/2022 Weekly (+/-) Point Change 12/23/2022 % Change YTD Week Ending 12/23/2022
DJIA 33,203.93  283.47 -8.63%
S&P 500 3,844.82  -7.54 -19.33%
Nasdaq Composite 10,497.86 -207.55  -32.90%
S&P Midcap 400 2,435.15  18.66 -14.32%
Russell 2000  1,760.93  -2.48 -21.57%


US Yields & Bonds

With increases in long-term yields, Treasury rates climbed through most of the week. (Bond prices and yields move in opposite directions.) The benchmark 10-year note yield traded around 3.73% early Friday morning, up from 3.48% at the end of last week.

The Bank of Japan’s (BoJ) surprise decision to widen the allowed band around 10-year Japanese government bond (JGB) yields (see below) was the driver of higher U.S. rates and a steeper Treasury curve. The Bank of England’s announcement that it will sell gilts early next year also contributed to higher U.S. yields, as did the slightly stronger-than-expected inflation data in the U.S.

The broad tax-exempt bond market sold off for most of the week but fared better than Treasuries. Widening credit spreads were partly due to reduced liquidity in the market and notable selling activity of higher-yielding bonds by exchange-traded funds.

The primary calendar for the investment-grade (IG) and high-yield corporate bond and loan markets remained quiet, with no new deals coming to market and no issuance expected until 2023.

US Treasury Markets – Current Rate and Bi-Monthly Change

3 Mth +0.03 bps to 4.28%
2-yr: +0.14 bps to 4.32%
5-yr: +0.24 bps to 3.86%
10-yr: +0.27 bps to 3.75%
30-yr: +0.27 bps to 3.82%


Interesting News Overseas

Last week shares in Europe gained ground amid signs of slowing inflation and an improvement in consumer confidence. The pan-European STOXX Europe 600 Index ended 0.64% higher in local currency terms. Major European indexes also advanced. Germany’s DAX Index ticked up 0.34%, France’s CAC 40 Index added 0.81%, and Italy’s FTSE MIB Index increased by 0.80%. The UK’s FTSE 100 Index climbed 1.92%, helped by the depreciation of the British pound against the U.S. dollar. A weaker pound usually supports the index because many of its companies are multinationals generating meaningful overseas revenues.

Producer price reports for November provided more signs that inflation may be waning in some large eurozone countries. Annualized producer prices fell markedly in Germany, France, and Spain as natural gas costs and electricity dropped. In Germany, factory-gate prices increased 28.2% yearly, lower than the 34.5% registered in the previous month.

Japan’s stock markets fell last week, with the Nikkei 225 Index down 4.69% and the broader TOPIX Index declining 2.68%. The Bank of Japan announced that it would modify its policy of yield curve control (YCC), allowing 10-year Japanese government bond yields to rise as high as 0.50%, doubling its prior implicit cap of 0.25%. The timing of the move was unexpected—most market participants had not expected a shift in BoJ’s YCC until next year. As a result, the JGB yield finished the week at around the 0.40% level, up sharply from the prior week’s 0.25%. BoJ policy developments also lent support to the yen, which strengthened to about JPY 132.55 against the U.S. dollar from around JPY 136.71 the previous week.

While the central bank kept its ultralow benchmark interest rates unchanged, the decision to modify its YCC policy and double the range within which JGB yields can fluctuate—to half a percentage point on either side of 0%—came as a surprise. In its Statement on Monetary Policy, the BoJ cited the desire to improve market functioning and encourage the smoother formation of the entire yield curve while maintaining accommodative financial conditions. The tweak to the YCC framework is aimed at enhancing the sustainability of monetary easing, it stated.

Higher prices for processed foods pushed core consumer inflation to 3.7% over the 12 months that ended in November. Many worry that building inflationary pressures could drive the BoJ toward more fully fledged monetary policy tightening, akin to that currently pursued by the other major central banks. With BoJ Governor Haruhiko Kuroda’s term ending in 2023, speculation is rife about the degree to which his successor will pursue policy continuity.

Lastly, Chinese stocks fell as a spike in coronavirus cases weighed on the country’s growth outlook. The Shanghai Composite Index sank 3.85%, and the blue-chip CSI 300 fell 3.19%. According to Reuters, the Hang Seng Index added 0.7% in Hong Kong.

The World Bank cut its China economic growth forecasts for this year and next due to the pandemic and the country’s ongoing property market slump. The bank projected that China’s economy would grow 2.7% this year and 4.3% in 2023, down from its September forecasts of 2.8% growth this year and 4.5% in 2023. The World Bank noted in a report that China’s economy is “subject to significant risks, stemming from the uncertain trajectory of the pandemic, of how policies evolve in response to the COVID-19 situation and the behavioral responses of households and businesses.”

This Week Ahead

The last week of the year will be quiet in the US, as markets are closed on Monday for the Christmas holiday, and only a few economic releases are due. However, investors still hope a so-called Santa Claus rally which usually happens on the last five trading sessions of the year and the first two of the new year, could occur. On the data front, it will be interesting to follow pending home sales, the S&P/Case-Shiller and FHFA house prices, goods trade balance, wholesale inventories, the Dallas Fed and the Richmond Fed manufacturing and services index, and the Chicago PMI.

Have a safe and Happy 2023!

Stephen Colavito

Stephen Colavito, Jr.
Chief Investment Officer
Perigon Wealth Management, LLC

D,M: 404.313.1382

This message is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell securities or other financial instruments. Past performance is not a guarantee of future results. Perigon Wealth Management is a registered investment adviser. More information about the firm can be found in its Form ADV Part 2, which is available upon request by calling 415-430-4140 or sending an email request to

Written by Perigon Wealth

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