Economic Data and Market Highlights
The Morgan Stanley All Country World Index increased 175 basis points. The Dow Jones Industrial Average rose 1.35% and topped 40,000 for the first time ever during the week. Tech stocks were the key driver of US returns as the NASAQ rose 2.16%. Global bonds rose 77 basis points while US bonds, rose 57 basis points.
Emerging markets were the key return driver of global markets during the week. The MSCI EM benchmark advanced 2.72%, largely from the Chinese market rallying 4.27% as the government released a wide array of measures to support its property market which included buy unsold homes and easing rules related to purchasing a home.
Within the US equity markets, the S&P 500 jumped 160 basis points. Tech stocks, as noted above were the key driver of performance, rising 2.95% but real estate stocks were also up nicely at 2.53%. The market’s rise this week was also broader as we compare the cap weighted S&P return, previously noted, with the S&P’s equal-weighted return of 1.16%.
Over the past few months’ utility stocks, rising 1.52% this past week, have outperformed the broader market, and a lot of those returns are driven by AI as it requires a lot of electricity to handle the computing power. Three of the best five stocks in the S&P 500 are utility stocks: Vistra, Constellation Energy, and NRG Energy. Vistra has even outperformed Nvidia this year with Constellation Energy not far behind. Last year saw the Dow Jones Utility Index underperforming the S&P 500 by the worst amount since 1999. Higher interest rates weighed on Utility names. Electricity providers haven’t seen growth in the space in recent years. 2021 saw less electricity produced than in 2007 per the federal Energy Information Administration. Energy demand for data centers alone should grow the demand for electricity 15% a year through the end of the decade per NextEra estimates.
The latest CPI results were released this week with the Year-over-Year coming in-line with expectations while the month over month came in 10 basis points less than expected which gave rise to the rise in real estate stocks. The Bureau of Labor Statistics includes stats and graphs to add more context. The chart below looks at the average inflation rate by income group noting the highest income and lowest income brackets, noting that the lower income brackets have experienced higher inflation than the average.
Due to limited supply of homes for sale, most US markets are still seeing rising sale prices in 93% of US metro markets, with recent data showing that the median single-family existing home price grew 5% YoY to $389,400. Nationally, active listings are still 36% lower than pre-pandemic levels. Some signs of falling home prices are beginning to show in areas such as Texas and Florida, which saw booming housing markets in the wake of the pandemic. In 10 major Texas and Florida metro areas, home inventories rose above pre pandemic levels, while San Francisco and Denver also showed signs of increasing supply.
The Past Week’s notable US data points
Data Source: Blackrock, Bloomberg, Charles Schwab, CNBC, Goldman Sachs, J.P. Morgan, Morningstar, Morgan Stanley, Standard & Poor’s, and the Wall Street Journal.
Authors:
Jon Chesshire, Managing Director, Head of Research
Michael McNamara, Analyst
Sam Morris, Analyst