Weekly Market Recap – January 13, 2023

Treasury Secretary Janet Yellin warned of a potential default on US debt if lawmakers fail to act on the debt ceiling prior to the January 19 deadline. A massive FAA software glitch grounded thousands of flights across the country, causing a complete shutdown of U.S. airspace. Areas of northern California were pounded with rainfall levels 600% above normal, leaving nearly 30 million people under flood watch warnings. On Thursday, more than 45 tornadoes ripped through 7 states in the South, destroying homes and businesses, and causing at least nine deaths. Tens of thousands of utility customers lost power.

The one-year inflation outlook declined to 5%, the lowest level since July 2021. That expectation, based on the New York Fed’s December survey, was 0.2% lower than the report for November. Other monthly economic statistics released, compared with previous measures, were: consumer price index -0.1% vs. +0.1%, core CPI +0.3 vs. +0.2, CPI (year-over-year) +6.5% vs. +7.1%, core CPI (year-over-year) +5.7% vs. +6.0%, CPI (excluding shelter) -1.6% vs. +1.3%, federal budget -$85 billion vs. -$21 billion, import price index +0.4% vs. -0.7%, NFIB small-business index 89.8 vs. 91.9, consumer credit $28 billion vs. $29 billion, real hourly earnings +2.2% vs. +0.7% and wholesale inventories (revision) unchanged at +1.0%. Regarding weekly stats, there were 205,000 initial jobless claims vs. 206,000 the week before, and continuing unemployment claims were 1.63 million vs. 1.70 million. There were no significant quarterly reports.

Following the above-mentioned reports implying an easing of inflation, stock market investors kicked off the week with a wave of buying. The Dow Jones Industrial Average closed at 34,302.61 (+2.0%), the S&P 500 rose 2.7%, settling at 3,999.09, and the NASDAQ Composite went out at 11,079.16 (+4.8%). The steady stock buying was so orderly that CBOE’s VIX inched steadily lower throughout the week, retreating 13.2% to 18.35, its lowest level in over a year. Along with the positive news was the implication of slowing interest rate hikes. This pressured the dollar in the FX markets, sending USD Index futures down to 101.946 (-1.6%), a level not seen since early June. The commodity sector rose, as per S&P’s GSCI; the portfolio of futures ended the week at 605.79 (+5.7%).

The metals futures contracts we monitor were mixed. Settlements and weekly percentage changes were: gold at $1,921.70 (+2.8%), silver at $24.372 (+1.6%), platinum at $1,072.50 (-2.9%), palladium at $1,787.30 (-1.1%), copper at $4.2160 (+7.8%) and aluminum at $2,548.50 (+11.0%). It should be noted that front-month COMEX gold has not seen a weekly close over $1,900 per ounce since last April.

Divergence persisted as energy commodity subcategories moved in opposite directions. The petroleum sector soared. Closing prices and their respective increases were as follows: WTI crude at $79.86 per barrel (+8.3%), Brent crude at $85.28 (+8.5%), heating oil at $3.2559 per gallon (+8.4%), and RBOB gasoline at $2.5328 (+12.8%), Conversely, the methane sector continued its plunge with NYMEX natural gas dropping to $3.419 per MmBtu (-7.8%), and ICE TTF Dutch gas falling 6.8% to close at €64.812 per MWh. Looking back, NYMEX natgas hasn’t been priced this low since July 2021; as for Dutch gas, these levels were last seen in December 2021.

Of the nine agricultural futures on our watchlist, six advanced, and three retreated. The gainers were: soybeans at $15.27¾ (+2.4%), corn at $6.75 (+3.2%), wheat at $7.43¾ (+0.03%), sugar at 19.73¢ (+4.1%), cocoa at $2,651 (+1.8%) and cattle at 157.725 (+0.6%). Coffee fell into the red, to $1.5170 per pound (-4.2%), along with cotton at 82.29¢ (-4.4%) and with lean hogs at 78.650 (-2.0%).

Futures Referenced in Market Recap

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