 | AUTHOR: Jason Roque, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, NASDAQ, Oil, Rates, FRB, PPI, CPI |
The week was mixed. Is this a fork in the road? Which direction should it go from here?
Monday S&P 500 0.63% | NASDAQ 0.39%
Markets gained to open the week. This came despite developing military actions in Israel. This happened due to speeches from a few Federal Reserve Board (FRB) members. Their comments surprisingly signaled the potential for additional pause in November. This caused yields to retreat and an equity advance. Several FRB members will be speaking this week. We will see if they walk back Monday’s comments as unintended redirecting of markets. If not, we may be at the height of interest rates for this cycle.
Tuesday S&P 500 0.52% | NASDAQ 0.58%
Equities continued the climb on Tuesday as yields on treasuries continued to slip lower. Reduced risk of FRB hikes and risk off sentiment driven by Middle East turmoil are keeping treasuries in demand. This also led to equities being in demand with risks to economic growth diminishing.
Wednesday S&P 500 0.43% | NASDAQ 0.71%
The Producer Price Index (PPI), a leading indicator of inflation, firmed in September to 2.2% annually. While the increase was not welcome, the level is encouraging as PPI is usually higher than the expected inflation. Equities rose on the day and the 10-year treasury continued to slip.
Thursday S&P 500 0.62% | NASDAQ 0.63%
The Consumer Price Index (CPI), an indicator of inflation, stayed at 3.7% when it was expected to retreat to 3.6%. The weight of this reading was too much for markets. Long-term yields climbed as demand waned and equities retreated on the risks of extended future rates at a higher level.
Friday S&P 500 0.50% | NASDAQ 1.23%
Financials did well Friday as corporate earnings showed strength this summer despite higher interest rates. The resiliency of the consumer should be concerning in the long run… That was the bright spot on the day. Risks of escalation in Israel caused oil prices to climb. The increased risk to inflation caused a retreat in treasuries, even as rates retreated on the day.
Conclusion S&P 500 0.45% | NASDAQ 0.18%
It was a mixed bag for markets. The week started strong, but the fade late left us with an up S&P 500 and a down NASDAQ composite. The elevated geo-political risks are in focus and driving inflation risks, interest rates risks, and equity markets in the short-term. The certainty of a FRB rate hike in November is under more speculation. The earnings season should be fruitful, which should continue to provide a mild green on the screen. The risks ahead would be on the looming deadline for a government shutdown in November. Look for that to be the next major headwind.
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