Weekly Market Recap

Risk assets struggled through the holiday-shortened work week as new case counts continued to rise in the US. In an effort to improve workplace safety, the Biden Administration announced on Thursday that the Department of Labor would direct all companies with more than 100 employees to require vaccines or weekly negative tests. The constitutionality of this directive was immediately called into question by several Republican governors.

Economic news was fairly encouraging. Initial jobless claims fell to a pandemic low of 310k, and the Job Openings and Labor Turnover Survey showed a record 10.9 million jobs available. Producer price inflation (PPI) remained elevated on a y/y basis at +8.3%, but with a smaller sequential gain in August relative to July.

Despite solid economic news, US equities finished lower across all sectors and market caps. Small caps underperformed, as did real estate stocks in a reversal of recent strength. International stocks also fell, albeit to a lesser degree.

Bond markets were little changed. 10y Treasury yields rose 2 basis points, while 30y yields fell by a basis point. Investment grade credit spreads rallied as a rampup in new corporate issuance was met by more-than-ample demand.

In commodity markets, oil and natural gas both finished higher in the aftermath of Hurricane Ida, with natural gas briefly eclipsing $5/MMBtu for the first time since early 2014. Away from the energy complex, most other commodity prices were little changed. Inflation hedges (chiefly gold & bitcoin) fell.

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Weekly Market Recap

Last week saw solid gains in the S&P 500 and the Dow, both of which closed at new all-time record highs on Friday. The Nasdaq pulled back slightly, driven in part by some mid-week softness in biotech. Small and midcap stocks were mixed.

Internationally, most developed market equities were stronger, while emerging market equities in aggregate were lower. Chinese stocks rallied early in the week, only to be met by renewed selling pressure on regulatory fears as the week progressed. MSCI’s China Index finished the week essentially unchanged.

Bond yields moved higher early in the week before falling abruptly on Friday in the wake of a significant decline in the University of Michigan’s consumer sentiment gauge. In the end, 10y and 30y Treasury yields both finished the week 2 basis points lower than where they started. Investment grade credit spreads held firm, while high yield spreads moved wider.

Economic data was plentiful last week:

* The JOLTS report showed more than 10 million US job openings

* Headline CPI held steady at +5.4% y/y (+4.3% ex food and energy)

* PPI rose to +7.8% y/y (+6.2% ex food and energy)

* Initial jobless claims fell for a 3rd straight week, to 375k

* U of M Consumer Sentiment fell to 70.2 in August, a new pandemic-era low

This audio version of the Weekly Market Recap can be found in your favorite podcasting app. Search for “Albion Financial Group”