Last Week in Review – February 3, 2023

February 6, 2023

Last Week In Review

Major indexes extended their winning streaks into February, helped by some upside surprises in economic data and fourth-quarter earnings reports, as well as what some saw as encouraging signals from the Federal Reserve. Last week the S&P 500 Index reached an intraday high of 4,195 on Thursday, its best level since late August.

A 23% jump on Thursday in Facebook’s parent company, Meta Platforms—the stock’s biggest daily gain in almost a decade—provided a significant boost to the technology-heavy Nasdaq Composite Index and other mega-cap technology and internet-related growth stocks. The social media giant beat revenue expectations for the fourth quarter, and CEO Mark Zuckerberg delivered an upbeat outlook for the year ahead. However, some enthusiasm drained on Friday following disappointing results and outlooks from Apple, Google’s parent company Alphabet, and

Technical factors seemed to 0accelerate the week’s gains. On Thursday, the S&P 500 marked its first “golden cross” in two-and-a-half years, as the index’s 50-day moving average drifted slightly above its 200-day average. Technical analysts use the metric to indicate an upward trend in the markets. Heavy “short covering,” or the buying of stocks by hedge fund buying cover their bets that the stock’s price will fall, also appeared to be at work.

US – Markets & Economy

The busiest week of quarterly earnings reports—companies representing roughly a third of the S&P 500’s market capitalization released results—coincided with a string of closely watched economic reports, resulting in multiple crosswinds for investors to consider. Better-than-expected earnings from General Motors, United Parcel Service, and other companies helped futures gain momentum on Tuesday morning. Still, the fundamental shift in sentiment followed the release of the Labor Department’s Employment Cost Index (ECI) as trading opened. The ECI rose 1.0% in the final quarter of 2022, a bit less than expected and its lowest level in a year, providing further evidence that a critical concern of Fed policymakers was moving in the right direction.

On Wednesday, the Fed raised official short-term interest rates by another quarter point, as was widely expected. Fed Chair Jerome Powell acknowledged at his post-meeting press conference that the ECI was “abating a little bit.” Powell also noted, however, that the ECI and average hourly earnings gains remained “fairly elevated” and that “the disinflationary process” was “at an early stage” and focused on goods prices because of healing supply chains. Nevertheless, the major indexes jumped as investors seemed to interpret the overall tone of his remarks as more dovish than expected.

Friday’s economic data brought major surprises that caused investors to reconsider their rate expectations and sharply increased bond yields. The Labor Department reported that employers added 517,000 nonfarm jobs in January, roughly triple consensus estimates and the biggest gain in six months. The unemployment rate slipped to 3.4%, its lowest level since 1969. (Weekly jobless claims, reported Thursday, fell to their lowest level in nine months.) Investors seemed to take the news mostly in stride, as the tight labor market did not seem to flow proportionately into wage gains. The monthly rise in average hourly earnings fell to 0.3%, helping bring the year-over-year increase back to 4.4%, the lowest level since August 2021.

Friday’s other surprise was January’s jump in services sector activity. The Institute for Supply Management reported that its index of nonmanufacturing activity jumped to 55.2 from 49.2 in December, reversing nearly all its steep drop in December and moving it well back into expansion territory (the 50 level separates contraction from expansion).

US – Equity Market Performance

Index Friday’s Close Week Ending 2/3/2023 Weekly (+/-) Point Change 2/3/2023 % Change YTD Week Ending 2/3/2023
DJIA 33,926.01  -52.07 2.35%
S&P 500 4,136.48  65.92 7.73%
Nasdaq Composite 12,006.96 385.25  14.72%
S&P Midcap 400 2,707.48  88.03 11.40%
Russell 2000  1985.53  74.07 12.73%


US Yields & Bonds

Powell’s seemingly dovish comments, reassuring inflation signals, and upside economic surprises sent the yield on the benchmark 10-year U.S. Treasury note on a round trip over the week, falling as low as 3.33% in intraday trading on Thursday before turning higher to end Friday at 3.53%, just above where it had ended the previous week. (Bond prices and yields move in opposite directions.) Healthy inflows and a lack of new supply helped tax-exempt municipal bonds over much of the week.

Investment-grade corporate credit spreads moved tighter (indicating strong performance relative to Treasuries) over the week, with more volatile corporate issues outperforming. Technical conditions were generally supportive as trading volumes in the secondary market were above daily averages, and primary issuance paused in the days leading up to the Fed’s monetary policy meeting.

High-yield bonds tracked equities higher, and the broad risk-on sentiment throughout most of the week led to expectations for the volume of new high-yield deals to pick up. The bank loan market was generally firm alongside the broader risk rally following the Fed’s interest rate decision, which was in line with expectations.

US Treasury Markets – Current Rate and Bi-Monthly Change

3 Mth -0.02 bps to 4.64%
2-yr: +0.09 bps to 4.29%
5-yr: +0.05 bps to 3.66%
10-yr: +0.02 bps to 3.52%
30-yr: -0.01 bps to 3.61%


Interesting News Overseas

Shares in Europe rose on hopes that central banks may be nearing the end of the most restrictive phase of this monetary tightening cycle. The pan-European STOXX Europe 600 Index ended the week 1.23% higher in local currency terms. Major stock indexes also advanced. Germany’s DAX Index added 2.15%, France’s CAC 40 Index gained 1.93%, and Italy’s FTSE MIB Index climbed 1.95%. The UK’s FTSE 100 Index rose 1.76%, partly bolstered by the pound’s depreciation against the U.S. dollar after the Bank of England (BoE) suggested interest rates might peak at a lower level than expected by the market.

European government bond yields declined broadly as investors embraced the potential that major central banks could pivot their monetary policy later this year. Germany’s 10-year sovereign bond yield fell toward 2% despite the European Central Bank (ECB) raising interest rates by half a percentage point and signaling a similar move in March. French and Swiss government bond yields also declined. In the UK, where the BoE also hiked rates, yields on benchmark 10-year debt followed global counterparts and approached 3%.

The ECB raised its key interest rates by half a percentage point, taking the deposit rate to 2.5%. Due to underlying inflation pressures, the central bank expects to raise rates by the same amount in March. The ECB added that it “will then evaluate the subsequent path of its monetary policy,” with “future decisions continuing to be data-dependent and following a meeting-by-meeting approach.” 

Japan’s stock markets registered mixed performance for the week, with the Nikkei 225 Index rising 0.46% and the broader TOPIX Index down 0.63%. The sentiment was boosted by expectations that the U.S. Federal Reserve’s monetary policy tightening cycle may be nearing its peak. The Bank of Japan (BoJ) reiterated its commitment to ultra-loose monetary policy.

The yield on the 10-year Japanese government bond (JGB) rose to 0.49% from 0.47% at the end of the previous week. Figures released by the BoJ showed that the central bank’s JGB purchases reached a record high in January as it sought to defend its wider 0.50% yield cap. The Fed’s moderation of its rate hikes and some anticipation of potential change in the BoJ’s easing stance supported the yen, which strengthened to around JPY 128.58 against the U.S. dollar from the prior week’s JPY 129.89.

On the economic data front, Japan’s industrial production fell 0.1% month on month in December, a smaller-than-expected decline, while annualized retail sales growth of 3.8% beat expectations on a continued post-pandemic recovery in consumption. Consumer confidence improved in January, while the unemployment rate was unchanged. Although the final services Purchasing Managers’ Index was revised slightly lower, the survey showed that services sector activity expanded quickly in January, boosted by the government’s travel subsidy program. 

Chinese equities fell in the first whole week of trading after the weeklong Lunar New Year holiday as investors pocketed gains from a recent rally and turned cautious about the strength of the country’s recovery. The broader capitalization-weighted Shanghai Composite Index eased 0.04%, and the blue-chip CSI 300 Index slipped 0.95%. In Hong Kong, the benchmark Hang Seng Index retreated 4.5%, its most significant weekly decline since the end of October, according to Reuters.

In economic news, China’s official manufacturing Purchasing Managers’ Index (PMI) rose to 50.1 in January from December’s 47.0. This marked a return to growth for the first time since September, as domestic activity improved after Beijing abandoned its coronavirus restrictions at year-end. The nonmanufacturing PMI rose to a better-than-expected 54.4 from 41.6, reaching its highest reading since June. Separately, the private Caixin/S&P Global survey of manufacturing activity in January remained below 50, the level separating growth from contraction, as output prices and new orders declined and exports retreated amid softening global demand. However, the Caixin/S&P Global survey of services activity rose to a better-than-expected 52.9 reading compared with 48.0 in December.

Meanwhile, the IMF raised its annual growth forecast for China as the economy rebounds after removing pandemic curbs. The IMF projected that China’s economy would grow 5.2% this year, up from its October forecast of 4.4%, and kept its estimate for 2024 at 4.5%.

Lastly, in recent weeks, two of the major credit agencies revised their assessments of Hungary’s financial situation. On January 20, Fitch changed its outlook on Hungary’s BBB rating from “stable” to “negative,” citing a challenging external environment and uncertainty regarding the flow of funds from the European Union (EU) as the main catalysts for the change. T. Rowe Price credit analyst Ivan Morozov acknowledges and agrees that higher energy costs following Russia’s invasion of Ukraine—given that Hungary relies greatly on Russian energy exports—have pushed Hungary’s current account into a significant deficit. That uncertainty regarding the flow of EU funds translates into uncertainty about how Hungary would fund that deficit.

One week later, S&P Global downgraded its rating on Hungary from BBB to BBB-citing the same reasons. The timing, however, was sooner than Morozov expected: S&P had reduced its outlook to negative back in August, so Hungary has not had much time to address S&P’s credit concerns. Morozov notes that Hungary is still considered investment grade despite these actions and believes that possible downgrades to below investment grade are not imminent.


This Week Ahead

The week will be soft regarding economic data in the US but jam-packed with earnings. Activision Blizzard, Fiserv, Vertex Pharmaceuticals, CVS Health, Uber, Walt Disney, AbbVie, PayPal, PepsiCo, and Philip Morris International are the leading US companies to publish earnings reports. The University of Michigan will release its preliminary consumer-sentiment index for January. The sentiment likely improved for a third consecutive month to 65, with inflation expectations prolonging their downward trend. Also, investors will follow the Commerce Department trade balance report. The trade gap in goods and services must have widened to USD 68.6 billion in December 2022 from USD 61.5 billion in the previous month, which was the lowest deficit since September 2020. Finally, initial and continuing jobless claims numbers will fuel the debate on whether the job market is cooling or could still surprise on the upside.

Lastly, we thank every client we work with for making Perigon Wealth one of the top RIA firms in the country.  We appreciate your trust and business.

The Forbes ranking of America’s Top RIA Firms, developed by SHOOK Research, is based on an algorithm of qualitative criteria, mostly gained through telephone, virtual and in-person due diligence interviews, and quantitative data. The algorithm weighs factors like revenue trends, assets under management, compliance records, industry experience and those that encompass best practices and approach to working with clients. Portfolio performance is not a criterion due to varying client objectives and lack of audited data. Neither Forbes nor SHOOK receive a fee in exchange for rankings. Please click here for additional information: Methodology

Have a great week!

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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