Investors had a lot of headwinds to contend with in the week just passed, from hotter-than-expected readings from two of the three closely followed monthly inflation reports, to a United Auto Workers (UAW) strike at key plants for each of the three US automakers, and the growing likelihood of a US government shutdown by month end, notes Sam Stovall, chief investment strategist at CFRA Research.
These concerns were in addition to an ongoing creep higher in the 10-year yield (recently 4.33%), WTI oil prices (around $92 per barrel), and the US dollar (DXY at 105.14). Yet, equity markets were encouraged by the consumer resilience exhibited through the stronger-than-predicted jump in retail sales, with and without autos.
In the end, while the data imply that the Fed may not be done raising rates (we still think a November rate hike remains on the table), the strength of demand for goods and services from consumers will likely ensure a soft economic landing rather than a recession. Finally, global stock prices may have been buttressed by comments following the ECB’s 25 basis point hike, indicating that its rate-tightening cycle may have come to a close.
Despite these crosscurrents, equities posted largely favorable performances week-to-date (WTD) through September 14. Indeed, while the S&P Composite 1500 gained 1.1%, it was accompanied to the upside by all sizes, styles, and 10 of 11 sectors. Only technology was ever so slightly in the red, while consumer discretionary and utilities recorded advances in excess of 3%.
In addition, 75% of the 153 sub-industries in the S&P 1500 were higher WTD, with automobile manufacturers gaining nearly 10%. Finally, two out of three stocks in the S&P 500 were higher on the week.
