Following a much stronger-than-expected rise in nonfarm payrolls for August, investors will likely be laser-focused on the readings for the Producer Price Index (PPI) and Consumer Price Index (CPI) in this holiday-shortened week, writes Sam Stovall, chief investment strategist at CFRA Research.
Markets are wondering whether these inflation measures will offer equally upsetting results that add upward pressure to the 10-year yield and the prospects for a rate hike at the next Federal Open Market Committee (FOMC) meeting. A continued move higher in yields would elicit comparisons to October 2023, when the 10-year yield peaked at 4.98%.
As a result of this pickup in ominous implications, the S&P 500 Index (^SPX) eked out only a 0.1% rise last week. The move was accompanied by declines in six of 11 sectors and 59% of the 153 sub-industries in the S&P Composite 1500.
The week will also offer more sobering conversations and comparisons as we pause and reflect on the 25th anniversary of the 9/11 terrorist attacks. The takeaway will not only include remembrance but also a reminder of resilience.
In this past quarter century, nominal GDP has risen by 207%, the year-over-year Core CPI has averaged 2.45% (compared with the July reading of 2.47%), and the S&P 500 has surged by more than 640%.
All sizes, styles, and sectors have gained in price, led by Information Technology (up a cumulative 2,352%), Consumer Discretionary (862%), and Industrials (653%). Furthermore, 86% of the 90 sub-industries in the S&P Composite 1500 in existence during the entire period have risen in price since 2001.
