This week ahead || Nov 13th - Nov 17th 2023

Inflation, Walmart, Target highlight a consumer-focused week: What to watch

The stock market continued its rebound last week with a Friday rally, pushing the major US indexes to their highest closing levels in nearly two months. In the upcoming week, investors will closely watch updates on the US consumer as the holiday shopping season unfolds. The October Consumer Price Index (CPI) report on Tuesday will provide a key inflation reading. Corporate earnings from big retailers like Home Depot, Target, and Walmart will be in focus, offering insights into consumer trends. Results from Alibaba and JD.com will be watched for signals on China's economic health. Moody's change in outlook on the US government's debt to "negative" will also draw attention. Despite a hiccup on Thursday, stocks recorded gains across the board last week, with the S&P 500 ending an eight-day winning streak. The week ahead will likely offer crucial insights into the consumer's health and inflation trends.

Rising delinquencies offer economic warning signs

Stocks rallied last week, with the S&P 500 climbing 1.3% to close at 4,415.24. The index is now up 15% year to date, up 23.4% from its October 12, 2022 closing low of 3,577.03, and down 7.9% from its January 3, 2022 record closing high of 4,796.56. However, there are signs of stress developing in the economy, particularly in delinquency rates for mortgages, auto loans, and credit cards. The New York Fed's Q3 Household Debt and Credit (HHDC) report indicates that the share of debt newly transitioning into delinquency is rising. While the delinquency rates are increasing, they remain below prepandemic levels. Despite these challenges, the overall data suggest continued economic growth. Consumer finances remain strong, and the economy is supported by various tailwinds. The rise in delinquencies aligns with the Federal Reserve's efforts to curb inflation by tightening monetary policy. The ongoing narrative suggests a softening trajectory for consumer spending rather than a severe downturn. Moody's change in outlook on the U.S. credit rating to "negative" highlights the risks to fiscal strength and the need for effective fiscal policy measures. The resumption of student loan payments has had a limited impact on the consumer so far, and household balance sheets remain strong. While the overall data support ongoing economic growth, vigilance is needed to monitor signs of shifting economic narratives. The macro crosscurrents, including the change in Moody's outlook, declining mortgage rates, falling gas prices, and supply chain pressures easing, contribute to the complex economic landscape.

Silver prices plunge amid Powell's hawkish stance and stronger dollar

Silver prices have faced significant downward pressure recently, influenced by Federal Reserve Chair Jerome Powell's hawkish comments and a strengthened U.S. dollar. Powell's indication that interest rates could rise if inflation remains elevated has led to a surge in the dollar's value and contributed to the decline in silver prices. The market is closely monitoring upcoming data on consumer price inflation and retail sales for further insights into the economic landscape. Despite a brief period of dollar weakness following some dovish interpretations of Powell's earlier remarks, overall market sentiment has remained cautious. Traders in Fed funds futures are now estimating a 22% likelihood of an additional rate hike by January. Global inflation concerns persist, and the potential for further monetary tightening adds to the bearish outlook for silver. The rise in the yield on the 10-year U.S. Treasury note reflects investor concerns about future inflation and the direction of monetary policy. Lackluster demand at a recent 30-year bond auction further suggests apprehensions about the long-term economic outlook. Unless there is an escalation in geopolitical tensions or disappointing economic reports from the U.S., the near-term forecast for silver appears to be pointing downward.

MYR Group sees institutional investors hold 88% stake

MYR Group Inc. (NASDAQ: MYRG) is predominantly owned by institutional investors, holding about 88% of its shares. Key players include BlackRock, Inc. (18%), The Vanguard Group, Inc. (7.5%), and Dimensional Fund Advisors LP (5.1%). Insider ownership is significant at $39 million, with CEO Richard Swartz holding 0.7%. Retail investors own 10%. The top 10 shareholders hold over half the shares, aligning interests. While MYR Group shows a high return on invested capital, recent stock performance is concerning, with a -13.75% 1-month return and a -20.18% 3-month return. The P/E ratio is 20.99, signaling potential overvaluation.