Michael Reinking

Coming into the holiday shortened week the S&P 500 was up just over 4% following back-to-back weekly gains to start the year. There was a buzz on Tuesday as traders returned to the floor but that was mostly about the NY Giants playoff win and didn't translate into trading with equity markets ending the session around unchanged.

The rally that started last Friday following the easing of wages within the employment report and decline in ISM Services has continued this week. Most of the gains happened ahead of the highly anticipated CPI report on Thursday which seemed to be driven by a fresh bout of FOMO as the soft landing narrative began to get some more traction.

We have officially wrapped up the first trading week of 2023. In a microcosm this week was a reminder that just because we have turned the page on the calendar the headwinds that equity markets were facing throughout last year haven't magically disappeared.

US equity markets pulled back throughout the week essentially reversing the one-day post-Powell rally from last week. This week has really been a continuation of the consolidation that has been going on since the better-than-expected CPI data released a month ago.

Coming into this week major US indices had spent the previous two weeks consolidating in a tight range following the better than expected CPI data. Last week in holiday shortened trade both the S&P 500 and the Dow Jones Industrial Average rallied ~1.5%  testing the upper end of that range.

Coming into this week the S&P 500 had rallied >4% in back-to-back weeks. We started the week with a modest pullback, but major indices closed out October with very solid gains. The S&P 500 ended the month up ~8% while the Dow Jones Industrial Average, which had closed higher for five consecutive weeks, closed out its best month since January 1976 up >14%.

It was an impressive week for US equity markets. The S&P 500 closed higher for the second consecutive week bring the two week tally to over 8%,

Heading into the open Friday morning it looked like the recent trend of early week strength fading in the back half of the week would continue. The S&P 500 had fallen in 8 of the last 9 weeks by an average of 1.4%, including a 2.4% selloff last week.

Last week equity markets closed at new YTD lows, with the S&P 500 ending the week lower for the sixth time in the last seven weeks. This capped off the worst monthly decline since March of 2020 (-9.3%) and the third consecutive quarter of losses (-5.3%).

Today was the official close of Q3. It has been a treacherous environment for financial markets throughout 2022 and this quarter encapsulated that. The quarter began with a sharp rebound as the S&P 500 rallied ~19% from the mid-June lows.