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Week in Review: Feb.13.2023 - Feb.17.2023

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February 20, 2023

The S&P 500 index fell 0.3% last week amid worries that further monetary tightening might be needed to keep inflation in check after January producer prices came in higher than expected.

The market benchmark ended Friday's session at 4,079.09, down from last week's closing level of 4,090.46. The index is almost flat for the month with a February-to-date gain of almost 0.1%. It's up 6.2% for the year to date.

The slim movement for the week came as data showed the producer price index rose 0.7% last month, surpassing the consensus estimate according to Econoday for a 0.4% increase. On an annual basis, the PPI advanced 6%, which was higher than analysts' consensus estimate for 5.5% growth, but down from December's 6.5% pace.

The higher-than-expected producer prices were unwelcome news for investors who've been hoping for inflation to ease enough for the Federal Reserve's policy-setting committee to slow down its rate increases. Adding to the concerns, Cleveland Fed President Loretta Mester said last week that the risks of inflation accelerating are still tilted to the upside and will require further monetary policy tightening.

The impact of the rate increases was evident in January housing data released last week as housing starts fell more than expected in January amid elevated mortgage rates.

The energy sector -- which had been the only gainer last week -- led last week's decliners with a 6.9% drop. Other decliners included real estate, down 1.4%, and materials, down 1.1%. The health care, technology and financial sectors also fell slightly.

The gainers were led by consumer discretionary, which rose 1.6%, followed by gains of 0.9% each in utilities and consumer staples. Other gainers included industrials and communication services.

The energy sector's drop came as crude oil futures and natural gas futures also fell. The decliners included shares of Devon Energy (DVN), which issued an outlook that RBC described as softer than expected. Devon also declared a quarterly dividend that RBC said was below its expectation. Shares fell 16% on the week.

In real estate, shares of Host Hotels & Resorts (HST) fell 6.8% as the lodging real estate investment trust reported Q4 results above analysts' mean estimates but forecast 2023 adjusted funds from operations below analysts' consensus view at the time. The REIT also forecast 2023 earnings per share below analysts' mean estimate at the time.

The consumer discretionary sector's gainers included Aptiv (APTV), which received higher price targets from analysts at a number of firms, including RBC Capital Markets, which cited a stronger margin outlook. Shares of Aptiv rose 6.1%.

In utilities, shares of Exelon (EXC) rose 5.7% as the company reported Q4 adjusted earnings per share and revenue above year-earlier results. The adjusted EPS matched the Street consensus estimate while revenue surpassed the Street view. Exelon also issued a guidance range for 2023 adjusted operating EPS that bracketed the Street view. In addition, the company boosted its quarterly dividend rate.

Next week's earnings calendar will feature retailers including Walmart (WMT), Home Depot (HD) and TJX (TJX) as well as other companies such as Medtronic (MDT), NVIDIA (NVDA) and Intuit (INTU).

The market will be closed on Monday for the Presidents Day holiday in the US. Economic reports expected in the rest of the week include January existing and new home sales, Q4 gross domestic product, January consumer spending and January personal consumption expenditures.

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