Weekly Market Recap – May 5, 2023

First Republic Bank, the second-largest U.S. bank to fail, was seized on Monday by regulators, who then accepted a bid from JPMorgan Chase to acquire most of its assets. The largest, Washington Mutual, which failed during the financial crisis of 2008, had also been acquired by JPMorgan Chase. The Fed raised rates by 0.25% in response to inflation pressure and recent bank failures, making the tenth straight increase in a row. The new rate is the highest since 2007. Treasury Secretary Janet Yellen warned that the U.S. could default on its debt as soon as June 1, stating that the nation would be unable to pay its bills if Congress does not raise or suspend the debt limit.

Monthly economic statistics released during the week, compared with the prior month’s levels were: construction spending +0.3% vs. -0.3%, factory orders +0.9% vs. -1.1%, the U.S. trade balance (deficit) -$64.2 billion vs. -$70.6 billion, consumer credit $26.5 billion vs. $15.3 billion, hourly wages +0.5% vs. +0.3%, hourly wages (year over year) +4.5% vs. +4.3%, job openings 9.6 million vs. 10.0 million, nonfarm payrolls +253,000 vs. +165,000, and the unemployment rate slipped to 3.4 from 3.5%. Weekly reports on unemployment showed initial claims rose to 242,000 from 229,000 and continuing jobless claims fell to 1.81 million from 1.84 million. There were two major quarterly releases. Q1 productivity showed a 2.7% drop vs. the Q4 1.6% rise, and unit labor costs in Q1 were +4.5%, an increase over +3.3% in Q4.

Equities markets whipsawed during the week as a consequence of the Fed rate hike and continuing banking sector shock. Although Friday’s job news helped mitigate a bit of the negativity among investors, the volatility remained high. CBOE’s VIX gained 8.9% to 17.19 points. When the dust settled at Friday’s closing bell, the indices we track ended as follows: the DJIA at 33,674.38 (-1.2%), the S&P 500 fell 0.8% to 4,136.25, and the NASDAQ Composite went out at 12,235.41 (+0.1%). In currencies, the trend of the USD Index slipped a bit, with the futures closing at 100.999 (-0.4%). The portfolio of commodity futures contracts in the S&P GSCI ended the week at 545.58 (-3.4%).

The precious and industrial metals we monitor were mixed. Settlement prices and weekly percentage movements were: gold at $2,024.80 (+1.3%), silver at $25.930 (+2.8%), platinum at $1,068.30 (-2.0%), palladium at $1,486.80 (-1.5%), copper at $3.8830 (-0.2%) and aluminum at $2,318.50 (-1.6%).

All of the energy contracts that we survey declined in varying degrees. Here’s how they played out: WTI crude at $71.34 per barrel (-7.1%), Brent crude at $75.30 (-6.3%), heating oil at $2.3147 per gallon (-2.6%), RBOB gasoline at $2.3790 (-6.0%), NYMEX natural gas at $2.137 per MMBtu (-11.3%), and ICE TTF Dutch gas at €36.574 per MWh (-5.1%).
Of the nine agricultural futures prices on our watch list, five rose and four sold off. The gainers were: soybeans $14.36½ (+1.2%), corn at $5.96½ (+2.0%), wheat at $6.60 ¼ (+4.2%), coffee at $1.8805 per pound (+1.1%) and cotton at 83.90¢ (+3.8%). Those that fell into the red were: sugar at 26.32¢ (-0.1%), cocoa at $2,933 (-0.1%), live cattle at 161.925 (-2.1%), and lean hogs at 83.775 (-8.6%).

Futures Referenced in Market Recap

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