Stocks pulled back, but the S&P 500 and Nasdaq still sit firmly above their respective 50-day moving averages. U.S. equities eased off record highs as slowing growth prospects and persistent inflation led to some profit taking. With all the global central bank commentary last week, anticipation is building for the Fed’s next meeting on September 21-22. In the meantime, this week presents plenty of additional data for consideration. Last week, all indexes finished lower. The Dow finished down 2.1%, S&P down 1.7%, and Nasdaq down 1.6%.
Last Week – Slowing Data
U.S. equities eased off record highs as slowing growth prospects and persistent inflation led to some profit taking. The S&P 500 and Nasdaq both slipped 1.5%+. Market breadth was quite weak, as all 11 S&P 500 sectors finished in the red, with consumer discretionary the outperformer. The S&P 500 Index returned -1.68% last week, with all four days in the shortened holiday week posting declines. Including the previous Friday, the index has marked five consecutive losing days after hitting an all-time closing high. Equity markets have followed an upward trend most of the year.
Goldman Sachs downgraded its 2021 U.S. growth estimate to a 5.7% annual rate, below the 6.2% consensus. The Fed’s Beige Book noted that growth had “downshifted slightly to a moderate pace”, slowing led by escalating inflation and a shortage of goods. On the labor front, U.S. job openings hit record highs for the fifth straight month, climbing to 10.9 million in July and exceeding total unemployed by 2.5 million. Workers continued to quit jobs at historically high rates, and new unemployment claims fell to another pandemic low of 310,000. The four-week moving average of 339,500 was also a pandemic low, indicating there has not been a rise in layoffs due to the Delta variant.
Producer prices in the U.S. surged 0.7% in August, above estimates but below July’s 1% pace. Excluding food and energy, core PPI only increased 0.3% Month-over-Month, but still 6.3% higher Year-over-Year. August’s year-over-year increase in producer prices is the largest on record. Labor and materials
shortages and supply chain bottlenecks contributed to the price increases. Regarding inflation, the CEO of Union Pacific said in an interview last week that “it doesn’t look like it’s temporary,” and that cargo congestion will likely continue well into next year.
With all the global central bank commentary last week, anticipation is building for the Fed’s next meeting on September 21-22. This week presents plenty of additional data. U.S. CPI is reported on Tuesday, and consumer inflation updates from Germany, the UK, and Canada will also filter in this week. U.S. manufacturing numbers are expected to decline, with updates coming in the Empire State and Philly Fed indexes along with the industrial production report. U.S. retail sales have stalled over the past 3 months, and Thursday’s August report is anticipated to show a continued drop. China’s retail sales are likely to weaken considerably Year-over-year. The week finishes up with UK retail sales and U.S. consumer sentiment.
Year-to-date index performance; Dow up 13.07%, S&P up 18.7%, and Nasdaq up 17.28% through the close on Friday.
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