Weekly Market & Economic Recap (Week of January 9, 2023)

• The World Bank sharply reduced its forecast of world economic growth this year, to 1.7%, which would be the third-weakest pace in nearly three decades, behind the global recessions of 2009 and 2020. The bank said the lower forecast reflected a “synchronous” tightening of monetary policy and continuing disruption caused by Russia’s war in Ukraine. It warned that small countries reeling from the pandemic and the effects of Russia’s war could see permanent losses to their output. Assuming that the war does not escalate, Ukraine’s economy is expected to grow by 3.3%, but only after a third of its GDP was wiped out last year. (Economist, January 12, 2023 https://www.economist.com/the-world-this-week/2023/01/12/business)

• U.S. stocks climbed Thursday after the latest inflation data showed cooling price pressures for the sixth consecutive month, likely keeping the Federal Reserve on track to slow its pace of interest-rate increases. (Wall Street Journal, January 12, 2023 https://www.wsj.com/articles/global-stocks-markets-dow-update-01-12-2023-11673523999?mod=markets_major_pos10)

• Market pros are searching for supercore inflation. More investors are paying greater attention to services inflation and labor-market data. Prices of services are rising quickly. Prices of goods are falling. Energy is all over the map. Policy makers and market watchers already strip out volatile components of price indexes to understand what is known as core inflation. These days, many are on the hunt for an even narrower measure: a supercore. (Wall Street Journal, January 12, 2023 https://www.wsj.com/articles/forget-core-cpi-market-pros-are-searching-for-supercore-inflation-11673413222?mod=markets_major_pos14)

• Stocks shake off gloom with reversal in big banks. BofA’s Hartnett says S&P 500 set for a fresh drop before rally. Goldman Sachs’ Kostin believes market pricing in soft landing. (Bloomberg, January 12, 2023 https://www.bloomberg.com/news/articles/2023-01-12/asian-stocks-set-for-boost-from-easing-inflation-markets-wrap?srnd=premium)

• World economy’s soft landing hopes boosted as 2023 begins. China’s sudden reopening changes its economy’s growth outlook. Warmer weather has taken the edge off Europe’s energy crisis. (Bloomberg, January 12, 2023 https://www.bloomberg.com/news/articles/2023-01-12/world-economy-walks-tightrope-between-recession-and-soft-landing?srnd=economics-v2)

• The nation’s largest banks said rising interest rates are likely to push the U.S. into a recession this year, though they are only starting to feel the effects in their quarterly earnings. The four largest commercial banks reported mixed fourth-quarter results on Friday. Lending grew more profitable and consumers continued to spend on credit cards, but the banks collectively stowed away $2.8 billion in the final three months of 2022 to cover potential loan losses. (Wall Street Journal, January 13, 2023 https://www.wsj.com/articles/jpmorgan-gets-a-lift-from-interest-rates-but-warns-of-mild-recession-11673612918?mod=markets_lead_pos1)

• The era of moonshots is (mostly) over. This year tech companies are taking a more earthly approach. Stock charts both explain the change in boardroom sentiment and tell the story following an epic Covid-fueled rise and fall. The tech-heavy Nasdaq fell 33% last year—its worst performance since 2008. (Wall Street Journal, January 14, 2023 https://www.wsj.com/articles/big-tech-stops-doing-stupid-stuff-11673675087?mod=markets_lead_pos10)

• Defiant bulls stand up to fed with trillion-dollar stock rally. Federal Reserve policy makers put markets on notice in their last meeting minutes. Runups in risky assets were a concern, fueling an “unwarranted easing in financial conditions” that bedeviled their efforts to cool inflation. (Bloomberg, January 13, 2023, https://www.bloomberg.com/news/articles/2023-01-13/defiant-bulls-stand-up-to-fed-with-trillion-dollar-stock-rally?srnd=markets-vp)

• Tesla cuts prices across models sold in U.S. Some buyers may now qualify for tax credits, but Wall Street is worried. Tesla shares ended down 0.9% on Friday. The stock fell around 65% last year, its worst annual performance. (Wall Street Journal, January 13, 2023 https://www.wsj.com/articles/tesla-cut-prices-but-some-buyers-wont-get-ev-tax-credit-11673702554?mod=markets_lead_pos5)

• First signs of recession pain look set to emerge from earnings. With costs still on the rise, interest rates starting to bite and consumer spending declining, results are expected to reveal the start of a US earnings recession, which will last until the second half of 2023, according to Bloomberg Intelligence strategists. (Bloomberg, January 14, 2023 https://www.bloomberg.com/news/articles/2023-01-14/first-signs-of-recession-pain-look-set-to-emerge-from-earnings?srnd=markets-vp)

• Washington bets on green hydrogen and companies line up to cash in. Plug Power hopes to be profitable for the first time in its 25-year history on back of new law. (Wall Street Journal, January 14, 2023 https://www.wsj.com/articles/washington-bets-on-green-hydrogen-and-companies-line-up-to-cash-in-11673647372?mod=markets_trending_now_article_pos1)

• China’s junk-bond market creaks open with a $400 million sale. Dalian Wanda Commercial Management Group’s transaction could inspire other real-estate firms to make offerings. (Wall Street Journal, January 12, 2023 https://www.wsj.com/articles/chinas-junk-bond-market-creaks-open-with-a-400-million-sale-11673529377?mod=markets_major_pos13)

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