An Ugly Week (Market Recap Week Ending October 1 )
Dow 34,607 (472) or (1.4%)
Nasdaq 15,115 (480) or (3.2%)
S&P 4,458 (97) or (2.2%)
U.S. 10 Year Treasury Yield 1.475%, +2.1 bp or 1.4%
Stagflation concerns along with the nasty business of politics conspired to drop all three indices lower again this week. Inflation numbers were higher than expected, putting a dent in the credibility of the Fed’s theory that high prices are transitory and Consumer Confidence, Initial Jobless Claims, and Chicago PMI all missed expectations. The lone bright spot was Durable Goods orders which beat expectations considerably. Meanwhile, the U.S. 10-year Treasury yield continued to climb, putting pressure on growth stocks, especially in the tech sector. This led to the Nasdaq performing the worst of the three indices this week. Finally, while the Congress agreed to a stopgap spending measure that will fund the government until December, there is still the matter of the dual infrastructure bills being negotiated in the Congress as well as the debt ceiling which must be raised by October 18 to avoid defaulting on our government debt obligations. All of which is to say, prepare for additional volatility next week and throughout October or at least until the debt ceiling is raised.
Market Data Points Next Week
Monday – Factory Orders. St Louis Fed President James Bullard speaks.
Tuesday – Pepsico (PEP) reports. September Markit and ISM Services PMI.
Wednesday – September ADP Employment.
Thursday – Initial Jobless Claims.
Friday – September Jobs Report (non-farm payrolls). Unemployment rate.
Last week’s trading…
Monday– Dow +71 to 34,869, Nasdaq (77) to 14,969, S&P (12) to 4,442.
- The reopening trade dominated today with Energy, Consumer Discretionary and Finanancials leading the way.
- August Durable Goods Orders rose 1.8% month over month vs +0.7% expectation.
- The 10-year U.S. Treasury yield continued its rise to 1.487% as investors prepare for the advent of asset purchase tapering.
- Retiring: Fed Presidents Kaplan (Dallas) and Rosengren (Boston) announced they would step down on October 8. Both men had been under scrutiny for their trading practices during the pandemic.
Tuesday – Dow (569) to 34,299, Nasdaq (423) to 14,546, S&P (90) to 4,352.
- Fears of a budget stalemate drove the markets lower today as Senate Republicans blocked a spending bill that would have funded the government through December and suspended the debt ceiling until December 2022. A spending bill must be passed by this Friday to avoid a government shut down and the debt ceiling must be raised by October 18 to avoid a government default on our debt.
- The 10-year U.S. Treasury yield rose as high as 1.567%.
- September Consumer Confidence missed expectations: 109.3 vs 115.3
Wednesday – Dow +90 to 34,390, Nasdaq (34) to 14,512, S&P +6 to 4,359.
- Tech shares continued to be punished as higher long-term rates diminish their discounted cash flows.
- Micron (MU) preannounced missed revenue and earnings numbers for their Q1 2022 which also pressured the tech sector.
- Seven of eleven S&P sectors traded higher today, led by the defensive sectors: Utilities, Consumer Staples and Health Care.
- The 10-year U.S. Treasury yield fell back 2.7 bp to 1.54%.
Thursday – Dow (546) to 33,843, Nasdaq (63) to 14,448, S&P (52) to 4,307.
- Initial Jobless Claims were 362,000 vs expectations of 335,000 and last week’s print of 351,000.
- September Chicago PMI missed expectations at 64.7 vs 65 and last month’s 66.8 number.
- All eleven S&P sectors traded lower led by Industrials, Consumer Staples, and Financials.
- The 10-year U.S. Treasury yield fell 2 bp to 1.52%.
- It was a September to forget: for the month, the Dow fell 4.3%, the Nasdaq tumbled 5.3%, and the S&P dropped 4.8%. The Dow and Nasdaq were negative for the quarter for the first time since Q1 2020. The S&P managed a 0.2% gain for the quarter.
Friday – Dow +482 to 34,326, Nasdaq +118 to 14,566, S&P +49 to 4,357.
- The August Core Personal Consumption Expenditure number rose 0.3% vs 0.2% expectations and was up 3.6% year over year, the highest number since May 1991.
- Ten of the eleven S&P sectors traded higher despite the inflation numbers. Energy, Communication Services and Materials led the rally.
- Merck (+8.4%) claimed that their new oral Covid-19 drug cut hospitalizations or death by 50% for patients with mild to moderate cases and will seek EUA for the treatment immediately.
- The 10-year U.S. Treasury yield fell 5 bp to 1.475%.
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