Weekly Market & Economic News Recap (Week of April 17, 2023)

• A top Federal Reserve official said the central bank had more work ahead to bring down inflation, suggesting another interest-rate increase would be warranted at the Fed’s meeting in two weeks. “Inflation is still too high, and we will use our monetary policy tools to restore price stability,” said New York Fed President John Williams in a speech Wednesday night to a group of financial-industry professionals in Manhattan. (Wall Street Journal, April 19, 2023 https://www.wsj.com/articles/top-fed-official-signals-support-for-may-interest-rate-increase-a7c9a531?mod=economy_more_pos4)

• Home Prices in March posted biggest annual decline in 11 years. Sales fell in March for the 13th time in the previous 14 months. (Wall Street Journal, April 20, 2023 https://www.wsj.com/articles/home-sales-fell-in-march-as-mortgage-rates-weighed-on-market-db88aac7?mod=economy_more_pos3)

• US funds that choose stocks based on environmental, social and governance criteria posted outflows for the second consecutive quarter as investors fled to safer assets amid Federal Reserve rate hikes. US investors pulled $5.2 billion from ESG funds last quarter. New ESG fund debuts reached 27, topping fourth-quarter number. (Bloomberg, April 21, 2023 https://www.bloomberg.com/news/articles/2023-04-21/esg-funds-spurned-for-safer-assets-as-quarterly-losses-mount?srnd=markets-vp)

• The Federal Reserve is actively considering closing a loophole that allows some midsize banks to effectively mask losses on securities they hold, a contributing factor in the collapse of Silicon Valley Bank. Led by vice chair for supervision Michael Barr, the Fed is considering ending an exemption that allows some banks to boost the amount of capital they report for regulatory purposes. (Wall Street Journal, April 21, 2023 https://www.wsj.com/articles/fed-rethinks-loophole-that-masked-losses-on-svbs-securities-4cc7f762?mod=economy_lead_pos4)

• Money is pouring into stock ETFs at a time when bearish warnings soar. Spigots turn back on at time when bearish warnings are rampant. Investors peeking heads out of foxholes, says George Pearkes. (Bloomberg, April 21, 2023 https://www.bloomberg.com/news/articles/2023-04-21/money-gets-shoveled-back-into-stocks-at-time-of-soaring-anxiety?srnd=markets-vp)

• Debt-ceiling standoff warps treasury trading. Divergence between one-month and three-month bills is largest on record. (Wall Street Journal, April 22, 2023 https://www.wsj.com/articles/debt-ceiling-standoff-warps-treasury-trading-a3d3c383?mod=markets_lead_pos12)

• Federal Reserve officials are on track to raise interest rates a quarter percentage point next month and signal a potential pause from the steepest hiking campaign in decades. (Bloomberg, April 22, 2023 https://www.bloomberg.com/news/articles/2023-04-22/fed-officials-on-track-to-hike-rates-and-signal-potential-pause?srnd=economics-central-banks)

• Car dealer markups helped drive inflation, study finds. The money dealers charged over makers’ suggested prices factored into a nearly 16% rise in the consumer-price index in recent years. (Bloomberg, April 22, 2023 https://www.wsj.com/articles/car-dealer-markups-helped-drive-inflation-study-finds-7c1d5a2d?mod=economy_lead_pos2)

• Big tech depends on AI shining through cloud haze. Microsoft, Amazon and Google expected to show another slowdown in cloud growth. (Wall Street Journal, April 23, 2023 https://www.wsj.com/articles/big-tech-depends-on-ai-shining-through-cloud-haze-9640bc92?mod=markets_major_pos1)

• U.S. and European business activity rose in April at the fastest pace in about a year, a boost for the global economy but a potentially complicating factor for central banks working to reduce high inflation. (Wall Street Journal, April 21, 2023 https://www.wsj.com/articles/europes-economy-grows-despite-banking-stress-98becb2a?mod=economy_more_pos1)

• Janet Yellen says security comes before economy in U.S.-China relationship. U.S. curbing some ties, but ‘a full separation of our economies would be disastrous for both countries’. (Wall Street Journal, April 20, 2023 https://www.wsj.com/articles/janet-yellen-to-say-security-comes-before-economy-in-u-s-china-relationship-234a8933?mod=economy_more_pos2)