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  • J. J. Wenrich CFP®

Weekly Market Performance – Monthly CPI Adds to this Week’s Market Volatility

Markets Blog

Index Performance

U.S. and International Equities

Markets Mostly Lower

Stocks finished mostly lower as Thursday’s September Consumer Price Index report added to this week’s market volatility and performance. On Thursday, the S&P 500 Index’s rally marked the fifth largest intraday reversal from a low in the history of the index while breaking a six-day losing streak. Investor sentiment, as measured by the spread between bulls and bears in the AAII data, is still in extreme territory as it is more than two standard deviations below its long-term average.

Fixed Income Lower Amid CPI

The Bloomberg Aggregate Bond Index finished the week lower as yields increased as expectations that the Fed will maintain its hawkish stance for the rest of this year following Thursday’s hotter-than-expected inflation report. High-yield corporate bonds, as tracked by the Bloomberg High Yield index, lost ground for the week, following their equity counterparts.

The move higher in Treasury yields this year has put upward pressure on most other business and consumer interest rates, as well residential mortgage rates. Agency mortgage-backed securities (MBS) are the second largest sector, (behind Treasury securities) so the impact of a slowing housing market impacts the MBS market as well.

Commodities Lower

After OPEC+ announced a 2 million barrel per day reduction in oil production last week in which oil gained over 10%, the commodity lost ground this week. The metals finished negative for the week as both gold and silver lost ground after finishing higher for two straight weeks last week.

Economic Weekly Roundup

September’s Sticky CPI

September headline inflation eases slightly to 8.2% year-over year from 8.3% in August. September’s inflation report was uneven across sectors. For example, used car prices declined for the third consecutive month, but rent and medical care prices continue to accelerate. Core inflation rose 6.6% from a year ago, the highest rate since 1982. The nagging pressure on core inflation will likely put pressure on the Federal Reserve (Fed) to stay aggressive. The biggest risk is inflation becoming entrenched in some sectors such as services as inflation cools in other sectors.

Fed Talk

The Federal Reserve released minutes from the September meeting. The Fed will calibrate the pace of tightening according to global conditions. The Committee will take into account financial and international developments, and this reassurance from the Fed should provide some salve for investors nervous about the ripple effects from volatility in the currency markets and derivatives markets. The Minutes confirmed Fed officials are watching the job openings rate for clues about labor market tightness.

Weekly Employment Report

Continuing claims for unemployment insurance for the latest week came in below economists’ expectations whereas initial claims missed expectations. Labor market conditions remain tight even though there are some signs of slowing job growth, increasing layoffs, and higher unemployment.

Week Ahead

The following economic data and potentially market-moving events are slated for the week ahead:

  • Tuesday: Capacity utilization (Sep), industrial production (Sep), manufacturing production (Sep), National Association of Home Builders Housing Market Index (Oct)

  • Wednesday: Building permits (Sep), housing starts (Sep), Federal Reserve Beige Book

  • Thursday: Weekly initial and continuing unemployment claims, existing home sales (Sep), leading indicators (Sep)

Next week, 65 companies are expected to report Q3 earnings results


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