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THIS WEEK'S UPDATE

| March 29, 2022
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THE WEEK ON WALL STREET

With growing confidence in the economy’s resilience, stocks posted another week of

solid gains. The Dow Jones Industrial Average rose 0.31%, while the Standard &

Poor’s 500 advanced 1.79%. The Nasdaq Composite index picked up 1.98% for the

week. The MSCI EAFE index, which tracks developed overseas stock markets, added

0.27%.


STOCKS EXTEND GAINS

Markets bounced around all week as investors grappled with the crosswinds of

rising yields, continued hostilities in Ukraine, and hawkish comments from Fed

Chair Jerome Powell. After suffering declines in two of the first three trading

sessions of the week, stocks turned higher on a good jobless claims number that

investors interpreted as continuing economic strength. Stocks drifted higher as the

week came to a close amid rising bond yields, which on Friday saw the 10-year

Treasury yield rise for the 13th time in 16 trading sessions.


LABOR MARKET

Many economists speculated that the invasion of Ukraine would likely shave

economic growth in the short term as hostilities worsened supply chains and

increased inflationary pressures. The impact, so far, has not been seen in the labor

market. Last week’s initial jobless claims fell by 28,000 to 187,000, the lowest level

since December 1969. The number of people on state unemployment rolls fell to

1.35 million, from 1.42 million the previous week, while open jobs are at a near-

record high of 11.3 million. Employers’ need for workers suggests that the demand

for products and services has remained resilient despite the events in Eastern

Europe.


THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Consumer Confidence. JOLTS (Job Openings and Turnover Survey).

Wednesday: Gross Domestic Product (GDP). Automated Data Processing (ADP)

Employment Report.

Thursday: Jobless Claims.

Friday: Employment Situation. Institute for Supply Management (ISM)

Manufacturing Index.


THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: Micron Technology, Inc. (MU), lululemon athletica, inc. (LULU), Chewy

(CHWY).

Wednesday: Paychex, Inc. (PAYX).

Thursday: Walgreens Boots Alliance, Inc. (WBA).


FINAL THOUGHTS

The market has travelled a long way from the recent lows in a relatively short period

of time. It wouldn’t surprise me to see it take a breath or two here. There is still a

lot of negativity priced in this market without much good news in the forecast. So,

any good news could push things a bit higher in the near term. Of course, more

negative news can do the opposite. Interest rates continue their march higher and

you’re starting to hear how the yield curve is beginning to flatten out. When the yield

curve is steep, banks can borrow money at lower interest rates and lend at higher

interest rates. Conversely, when the curve is flat they find their margins squeezed,

which can deter lending. A flat yield curve doesn’t mean inverted yield curve. An

inverted curve is when short-term rates are higher than long term rates. Inverted

yield curves can lead to recession, but not always. Nonetheless, you’ll hear every

doomsdayer out there singing this song. The Fed has some work to do to curb

inflation, but Armageddon is not at hand.


I was travelling last week and I will tell you, people are out spending money. They’re

finally starting to get beyond the fears of Covid and sans another round of some

other variant I suspect you’ll see record numbers of travelers this summer despite

high gas prices. I won’t get into it here today, but unless you’re on the fringe $1

higher gas prices isn’t changing your life. Yes, higher gas prices are annoying and

you’d rather spend the money on other things, but you’re not changing your lifestyle

at these prices. Sure, there is a line in the sand where you will begin to change your

habits, but I don’t know many who have done this just yet. If they’re smart, big

businesses hedge some of their fuel prices, so they are equipped to deal with this in

the near term. Finally, it has been said and proven many times over that the best

cure for high oil prices is high oil prices. Oil companies drill more when prices are

high. Higher oil reserves typically start to push prices back down. Rig counts have

been going up. Stay tuned…

Have a good week!

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