Q3 Reports Boost Market
Strong quarterly earnings reports lifted the equities market to new highs last week. Earnings, in general, have surprised to the upside except for a few notable names such as Apple and Amazon that disappointed, blaming supply chain bottlenecks. For the week, consumer discretionary companies performed well, helped by Tesla, saying that rental company Hertz agreed to buy 100,000 of its electric vehicles.
The Story’s Still Positive
Gains in the equity markets led to new record highs last week. Earnings reported by companies continued to beat expectations, pulling indices higher. Real estate, utilities and health care shares outperformed.
A bit of a rebound
After struggling earlier in the week, equities rallied to finish the week higher on back of strong earnings and positive economic news. Real estate, materials and consumer discretionary sectors outperformed while communication services lagged.
Crude Highest Since 2014
Crude prices crossed the $80 per barrel last week, the highest level since 2014. The energy demand rebound from the depths of COVID-19 combined with global transport bottlenecks complicating fuel distributions has raised prices for oil, gas, and coal. The rebound helped energy stocks rally for the week while airline shares lagged due to higher fuel costs. Higher oil prices will provide additional upward pressure on inflation,
September Effect
Since 1950, the Dow Jones Industrial Average has averaged a 0.8% decline, and the S&P 500 had a 0.5% drop during September, according to Investopedia. This annual anomaly is named “The September Effect.” This September was no different. Last week, equities pulled back on inflation and interest rate fears to close the month in the red for major equity indexes.
Evergrande Losses Reversed
Fears of financial contagion coming from Chinese developer Evergrande, the country’s second largest, sent stocks diving at the start of the week. By Thursday, the losses were reversed as investors became more confident that the damage was mostly limited to China.
Storms Stir Up Energy Stocks
Stocks finished the week lower on mixed economic data. Energy stocks gained for the week as storms in the Gulf of Mexico threatened to disrupt oil production while materials and utilities lagged. The August CPI came in lower than expected, supporting the Federal Reserve’s position that transitory factors are caused by rising prices.
Is it STAGFLATION?
Some investors fear a slowing economy, while others fear higher inflation. And some fear that both will happen, which is called stagflation. We might get an indication of which is the case this week with the August sales report and the Consumer Price Index (CPI) data.
Full FDA Approval Helps Sentiment
It was a good week for equities as stocks hit new all-time highs once again. The Pfizer Vaccine’s full FDA approval helped sentiment early in the week before turning sad with the news of an attack at Kabul airport in Afghanistan. Investor sentiment ended on a high note with the Federal Reserve Chairman Powell on Friday.
Retail Sales Slumping
Disappointing consumer confidence numbers and slumping retail sales data have investors worried that economic growth might have peaked. This week, we will have economic reports around manufacturing, services, home sale, personal income, and spending.