Market rebounds ahead of Fed

  • Stocks bounce, inflation cools, bank volatility lingers
  • Tech strong, oil tumbles, gold and Treasuries jump
  • This week: Fed rate announcement, durable goods, home sales

Down, up, down, up, down—and up for the week.

That was the story last week as the stock market navigated regional bank volatility in the lead-up to this week’s key interest rate announcement.

Last Monday the S&P 500 (SPX) fell to its lowest low since January 3, but zigzagged its way to a five-day high on Thursday, and ended the week with a gain despite pulling back on Friday:

Chart 1: S&P 500 (SPX), 1/6/23–3/17/23. S&P 500 (SPX) price chart. Wide-swinging week.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.) Note: It is not possible to directly invest in an index.

The headline: Stocks end choppy week in plus column.

The fine print: The bank story overshadowed last week’s relatively cool inflation numbers—the Consumer Price Index (CPI) increased at a slower rate in February and was in line with expectations, while the Producer Price Index (PPI) slowed much more, and was well below estimates.

The number: -0.4%, the larger-than-expected decline in retail sales reported last Wednesday.

The move: Last Monday the Cboe Volatility Index (VIX) jumped 24% to 30.81—its highest level since October.

The scorecard: The Nasdaq 100 (NDX) tech index enjoyed its biggest up week since November, while the small-cap Russell 2000 (RUT) joined the Dow Jones Industrial Average (DJIA) in negative territory for the year:

US stock index performance for week ending 3/17/23. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)

Sector returns: The strongest S&P 500 sectors last week were communication services (+7%), information technology (+5.6%), and utilities (+3.9%). The weakest sectors were energy (-7%), financials (-6%), and materials (-3.3%).

Stock movers: Provention Bio (PRVB) +260% to $24.1, Calliditas Therapeutics (CALT) +33% to $22.42, First Republic Bank (FRC) -62% to $31.21, Western Alliance Bancorp (WAL) -47% to $26.12—all on Monday.

Futures: Crude oil fell out of its multi-month trading range, hitting its lowest price since November 2021 and suffering its biggest weekly loss since April 2020. May WTI crude oil (CLK3) ended the week down more than $10 at $66.93/barrel. Flight-to-quality trading helped push April gold (GCJ3) to $1,973.50/ounce by Friday—up more than $100 for the week, and the market’s highest level since April 2022. Week’s biggest up moves: to come March Micro bitcoin (MBTH3) +34.8%, March Micro ether (ETHH3) +23.3%. Week’s biggest down moves: June Russian ruble (R6M3) -14.5%, April WTI crude oil (CLJ3) -13.6%.

Coming this week

As of Friday, the market-based odds of a 0.25% rate hike were 63%, while the odds of no change stood at 37%:1

Tuesday: Existing Home Sales
Wednesday: Fed interest rate announcement
Thursday: U.S. current account, New Home Sales
Friday: Durable Goods Orders, S&P Global Manufacturing and Services PMIs (flash)

This week’s earnings include:

Monday: Foot Locker (FL)
Tuesday: On Holding (ONON), Dice Therapeutics (DICE), HealthEquity (HQY), Nike (NKE)
Wednesday: Ollie’s Bargain Outlet (OLLI), Winnebago (WGO), Chewy (CHWY), KB Home (KBH), Phreesia (PHR), Worthington Industries (WOR)
Thursday: Accenture (ACN), Commercial Metals (CMC), Darden Restaurants (DRI), Neogen (NEOG), Movado (MOV), Scholastic (SCHL)
Friday: Actinium Pharmaceuticals (ATNM)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

The weekly perspective

The SPX did something unusual last week—it rallied after falling more than 4% in a week and closing at its lowest level in at least a month.2 Since 1958, the SPX has lost ground after such weeks a little more often than not—52% percent of the time.

That begs the question, what has happened after the SPX rallied the week after a 4%-or-larger down week?

The short answer is that it was more likely to fall the next week—56% of the time, with an average return of -1%. The week after that, however, was more likely to be an up week (62% of the time). After four weeks, the index was higher in 54% of cases, with an average gain of 0.63%. But that’s a little lower than the SPX’s 61% overall odds of rallying in any given four-week period.


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1 CME Group FedWatch tool. Target Rate Probabilities For 22 March 2023 Fed Meeting. 3/17/23.
2 All figures reflect S&P 500 (SPX) weekly prices, 1958–2023. The pattern specifically refers to 4%-or-larger down weeks that closed at the lowest price of at least the past four weeks, and were also preceded by an up week. Supporting document available upon request.

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