10|05|2021

October Scare? | October 1, 2021

AUTHOR: Jason Roque, CFP®, APMA®, AWMA®
TITLE:   Investment Adviser Rep – CCO
TAGS: S&P 500, NASDAQ, CPI, PPI, Oil, Retail Sales, Sentiment
  

Markets lost ground for the second week. Does this say more about the last two weeks or the week ahead?

Monday                       S&P 500 0.11% | NASDAQ 0.41%

Markets opened the week in a muted tone. There was very little movement as Consumer Price Index (CPI) data was awaited on Tuesday.

Tuesday                        S&P 500 1.12% | NASDAQ 1.54%

CPI data for February showed inflation inching up slightly. Markets opened in the red on the news, but an earnings beat by Oracle allowed equities to march higher.

Wednesday                 S&P 500 0.19% | NASDAQ 0.54%

Crude oil inventories fell when a surplus was expected, which will further support higher prices for energy. Interest rates climbed on the back of the higher than expected CPI data from Tuesday. Growth stocks lagged as the data implies the Federal Reserve Board (FRB) will be less likely to cut rates.

Thursday                     S&P 500 0.29% | NASDAQ 0.30%

The Producer Price Index (PPI), a wholesale inflation gauge, rose in February to 1.6%. Retail sales advanced less than expected and initial jobless claims remained benign. A strong jobs market with firming inflation does not bode well for future rate cuts. Markets sold on the news, though not aggressively, as hope remains for FRB rate cuts later in the year.

Friday                          S&P 500 0.65% | NASDAQ 0.96%

Consumer sentiment is projected to fall to 76.5 in March from 76.9 in February. While lower, February and March are the first readings in the 70’s since August of last year. The week closed out on a sour note as commodity prices rise with inflation data. Further concerns mount that the inflation fight may have longer to go before a rate cut.

Conclusion                  S&P 500 0.13% | NASDAQ 0.70%

This is the first back-to-back losing weeks for the market in 2024. This leads to an FRB meeting week where guidance about potential future rate cuts will be hotly watched. Not only is the FRB meeting next week, but there is very little in the way of economic data for the week. This puts all the more focus on the FRB. 

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September turned out to be a volatile month after all. Should we expect a scare from October as well?

Monday

The S&P 500 started the week mildly lower, 0.27%. Core durable goods orders delivered less return than expected. It rose 0.2% in August where 0.8% was expected. The focus was more on the debate in Washington over the debt ceiling and the potential of a government shutdown.

Tuesday

Selling accelerated on Tuesday as the S&P 500 lost 2.04%. Long term interest rates climbed dramatically on the day as tighter monetary policy is expected in the future. The Federal Reserve Board (FRB) Chair, Powell, was testifying in Washington. Concerns that ’Transitory’ inflation, will not be so transitory, dominated rate activity.

Wednesday

Markets stabilized on Wednesday, but that is not necessarily good news. The S&P 500 rose 0.1%. It is important to observe investor activity the day following a large sell off. The lack of a bounce signals an acceptance of fair value for the losses of the previous day.

Thursday

Selling pressure persisted on the last day of the month as the markets sold off an additional 1%. This gave us a negative month on the S&P 500 for the first time since January. In case you forgot, we had Game Stop to thank for January… You take that out of the equation, and this is the first down month since October of last year.

Friday

New month, new you??? Markets welcomed the 4th quarter, as the S&P 500 rose 1.15% to end the week and say goodbye to September. The Government averted a shutdown on Thursday night lending to the upbeat tone of investors. To be clear, the debt ceiling still needs attention over the next few weeks.

Conclusion

What a September it was, as the S&P 500 lost 4.75%! A market correction is marked by a fall of 10% or greater. Look for volatility to continue in October as the debt ceiling situation remains unresolved. Also, we are building to what should be an FRB tapering program in November. That will be just in time for the consumer to save the economy with holiday shopping…

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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.