Monthly Market Insights | April 2022
Greater clarity on monetary policy and improved investor sentiment on the economic outlook propelled stocks in March to their first monthly gain of the year.
The Standard & Poor’s 500 Index led, gaining 3.58 percent. The Dow Jones Industrial Average added 2.32 percent, and the Nasdaq Composite picked up 3.41 percent.1
Rough Start, Strong Rebound
The month started out with the same anxieties that dragged the stock market lower in January and February: rising bond yields, slowing economic growth, elevated inflation, and Ukraine. The escalation of hostilities in Ukraine, along with a continuing stream of Western economic sanctions, heightened concerns over the war’s impact on inflationary pressures and the global economy, sending stocks lower in the early part of March.
Fed Raises Rates
A combination of strong economic data and the announcement by the Fed that it was raising rates by a quarter of a percentage point set the stage for a strong rebound in the second half of the month.
While stocks wobbled immediately following the Federal Open Market Committee’s news, investors subsequently reinterpreted the Fed’s aggressive steps as a serious commitment to taming inflation and a reassuring statement about the current health of the economy to withstand higher interest rates.2
Yield Curve Concern
Investors’ attention turned to the bond market as the month progressed. In early March, the spread between the 2-year and 10-year Treasury yields was 85 basis points. By March 30, that spread had narrowed, and some parts of the bond yield curve had inverted.3,4
Some view a yield curve inversion as a signal that the economy may be headed toward a recession. While yield curve inversions are not flawless predictors of future economic activity, its action was a concern and is likely to remain so in the months ahead.
Every industry sector enjoyed a month of positive performance, with gains in Communications Services (+2.43 percent), Consumer Discretionary (+6.31 percent), Consumer Staples (+1.56 percent), Energy (+9.79 percent), Financials (+1.82 percent), Health Care (+6.45 percent), Industrials (+4.71 percent), Materials (+7.15 percent), Real Estate (+8.41 percent), Technology (+4.71 percent), and Utilities (+9.73 percent).5
What Investors May Be Talking About in April
The initial estimate of the first quarter’s Gross Domestic Product will be released on April 28. It should provide investors with insight into how the economy weathered the stresses of a wave of Omicron infections early in the first quarter and the repercussions of Russia’s invasion of Ukraine, which started in late February.
At the same time it releases the GDP report, the Bureau of Economic Analysis also will report the Personal Consumption Expenditures Index (PCEI).
The PCEI is one of the benchmarks watched by the Federal Reserve to assess inflationary trends. The Federal Open Market Committee (FOMC) meets in early May so the index may play an oversized role in any decision on interest rates.
Overseas markets rebounded in March, with the MSCI-EAFE Index gaining 1.15 percent.6
Major European markets were mixed, with losses in Italy (-1.55 percent), Spain (-0.40 percent) and Germany (-0.32 percent). The U.K. picked up 0.77 percent and France edged higher.7
Stocks in the Pacific Rim markets were led by a surge in Australia (+6.39 percent). China’s Hang Seng index lost 3.15 percent while Japan’s Nikkei added 4.88 percent.8
Gross Domestic Product (GDP)
The final read of fourth-quarter GDP annualized growth rate was 6.9 percent, revised down slightly from its previous estimate of 7.0 percent.9
Employers added 678,000 jobs in February. The unemployment rate dipped to 3.8 percent, while workers’ wages rose 5.1 percent from a year ago. The labor force participation rate ticked up to 62.3 percent from 62.2 percent.10
Retail sales rose 0.3 percent, a deceleration from January’s increase of 4.9 percent.11
Output from the nation’s factories, mines, and utilities increased by 0.5 percent, led by gains in the manufacturing sector.12
Housing starts rose 6.8 percent from January levels and were 22.0 percent higher versus February 2021.13
Existing home sales fell 7.2 percent as mortgage rates rose, and the median sales price jumped 15 percent from February 2021.14
New home sales slipped 2.0 percent from January’s and came in 6.2 percent lower year-over-year.15
Consumer Price Index (CPI)
Consumer prices rose 0.8 percent in February, pushing the year-over-year inflation rate to 7.9 percent, the highest level since January 1982. Excluding the more volatile food and energy prices, the 12-month increase was 6.4 percent, up from 6.0 percent a month earlier.16
Durable Goods Orders
Orders of goods designed to last three years or longer were down 2.2 percent from a month earlier.17
The Federal Reserve raised interest rates by 0.25 percent, with the Federal Open Market Committee (FOMC) signaling that it may increase interest rates at a faster pace than it originally anticipated in December.
Based on its projections of the federal funds rate, the Fed may implement as many as seven quarter-point hikes this year and another three to four next year. The FOMC also indicated that it would soon announce its strategy for reducing the Fed’s $9 trillion balance sheet.18
By the Numbers: Burritos, Tacos, and More
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The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and considered a broad indicator of the performance of stocks of technology and growth companies. The Russell 1000 Index is an index that measures the performance of the highest-ranking 1,000 stocks in the Russell 3000 Index, which is comprised of 3,000 of the largest U.S. stocks. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark for the performance in major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
The Hang Seng Index is a benchmark index for the blue-chip stocks traded on the Hong Kong Stock Exchange. The KOSPI is an index of all stocks traded on the Korean Stock Exchange. The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. The SENSEX is a stock market index of 30 companies listed on the Bombay Stock Exchange. The Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange. The Bovespa Index tracks 50 stocks traded on the Sao Paulo Stock, Mercantile, & Futures Exchange. The IPC Index measures the companies listed on the Mexican Stock Exchange. The MERVAL tracks the performance of large companies based in Argentina. The ASX 200 Index is an index of stocks listed on the Australian Securities Exchange. The DAX is a market index consisting of the 30 German companies trading on the Frankfurt Stock Exchange. The CAC 40 is a benchmark for the 40 most significant companies on the French Stock Market Exchange. The Dow Jones Russia Index measures the performance of leading Russian Global Depositary Receipts (GDRs) that trade on the London Stock Exchange. The FTSE 100 Index is an index of the 100 companies with the highest market capitalization listed on the London Stock Exchange.
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1. WSJ.com, March 31, 2022
2. WSJ.com, March 17, 2022
3. Treasury.gov, March 31, 2022
4. CNBC.com, March 28, 2022
5. SectorSpdr.com, March 31, 2022
6. MSCI.com, March 31, 2022
7. MSCI.com, March 31, 2022
8. MSCI.com, March 31, 2022
9. BEA.gov, March 30, 2022
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11. CNBC.com, March 16, 2022
12. Morningstar.com, March 17, 2022
13. MarketWatch.com, March 17, 2022
14. CNBC.com, March 18, 2022
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20. Knowledge-sourcing.com, August 2021. Market size value in 2019
21. Tasteatlas.com, January 13, 2021
22. Guinnessworldrecords.com, 2022
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