September ended on a challenging note, with Treasury yields moving higher and equity prices falling as the month drew to a close. The first trading day in October provided a respite, as yields stabilized and equities rebounded to begin Q4 with solid gains. The energy sector was a bright spot last week, delivering a 5.8% return thanks to rising oil prices. International stocks underperformed, with softness in developed and emerging markets. Chinese equities were stable.
Bond prices finished the week lower across Treasuries, munis, and corporates. With credit spreads already near multi-decade tights, they have limited room to compress to offset any material increase in Treasury yields. See the Chart of the Week for a time series of IG & HY spreads.
Oil & gas prices rose to fresh pandemic highs last week, as government officials in Beijing ordered state-owned energy companies to stockpile supplies for the coming winter at all costs. Other commodities echoed the trend in rates and equities, softening for most of the week before rallying on Friday.
Economic news was mixed last week. Initial jobless claims rose, consumer confidence softened, and Wards total vehicle sales fell more than economists expected. On a most positive note, durable and capital goods orders rose more than expected in August data, while the ISM manufacturing index (including the new orders component) exceeded consensus estimates for September.