Gradient Investments Weekly Talking Points 2/14/2022
All data is for the week ended February 11, 2022
Stocks
Indices weighted toward the US and technology stocks were down last week, with the NASDAQ and S&P 500 declining 2.17% and 1.79%, respectively. The Russell 2000 rose 1.42%. Overseas, the international developed markets index (MSCI EAFE) rose 1.43% while the emerging markets (MKSCI EEM) advanced 1.61%. Within the US, energy and materials were the best performing sectors while communication services and technology were the laggards.1
Fixed Income
The benchmark 10-year treasury note crossed the 2% mark on Thursday following a report of higher-than-expected inflation in January. Additionally, one of the Federal Reserve’s regional presidents that day said that he would like to see the Fed raise rates by 100 basis points (or 1%) over its next three meetings.2 The 10-year yield fell back on Friday to finish the week at 1.92%3 after investors bought US treasuries on fears over a Russian invasion of Ukraine.4
Commodities
Oil prices edged higher last week, with West Texas crude up 0.9% to $93.10 per barrel on fears of lower oil supplies from Russia as it appeared it would invade Ukraine.5
Economic Data
Inflation accelerated in January to 7.5% year over year or 6.0% after stripping out more volatile food and energy prices (core inflation).6 Used cars and trucks prices rose 40.5% and energy prices rose 27.0% over the past twelve months. Food at home prices were also notably strong led by proteins which rose 12.2%.7
Consumer confidence fell to an initial February reading of 61.7, the lowest reading in ten years. Economists were expecting a reading of 67.0, in line with the prior month. Expectations for inflation over the next year rose to 5%.8
The number of U.S. workers filing first-time applications for unemployment benefits declined 6.7% last week to 223,000, about 11,000 fewer than the consensus estimate.9
Company News10
Southwest Airlines (LUV), a Contrarian Choice and Core Select holding, rose 4.3% last week after news of the first airline merger in ten years (between Frontier and Spirit Airlines) spurred discussion of more consolidation in the industry.11
Varonis Systems Inc. (VRNS), a G33 and Core Select holding, reported revenue and earnings that beat expectations. Management also guided revenues to rise in the 25% area for the year, which was ahead of recent expectations. Shares rose 8.2% for the week.12
Did you know…
Just in time for Valentine’s Day! Ruby chocolate is the fourth chocolate type and the first new chocolate type in 80 years. It is pink due to the color of the cocoa beans used to make it and has a berry flavor. It was unveiled by Swiss-Belgian cocoa company Barry-Callebaut, supplier to food and beverage manufacturers, in 2017 after it had been in development for 13 years.
Mariann Montagne, CFA
Portfolio Manager
Sources:
1 JP Morgan Weekly Market Recap 2-14-22
6 Bureau of Labor Statistics CPI 2-10-22
7 Bureau of Labor Statistics CPI by Expenditure Category 2-10-22
8 University of Michigan 2-11-22, Inflation Expectations
10 All weekly changes in company stock prices: Yahoo Finance
11 Frontier Airlines press release 2-7-22