Markets Manage to End on Slight Gains Despite Concerns Around the Debt Ceiling, Inflation, and Material Shortages

Market Recap Week ending 10.8.21

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Financial markets took a step back in the final week of the third quarter. Increased Markets started the week lower but were able to recover losses and make slight gains by the end of the week. Concerns regarding the debt ceiling, the static state of the infrastructure bill, raw materials shortages, inflation, and kinks in the global supply chain remained with investors. In the middle of the week, investors were encouraged by the Senate’s ability to extend the debt ceiling by $480 billion until December 3rd, which opened the door for “buy the dip investors” to return to the market. However, a disappointing September Employment Situation Report on Friday once again dampened investor sentiment. Technically, the 50-day moving average of the S&P 500 now acts as resistance; this level will continued to be watched to see if the market can regain It, if not, the market will continue to vulnerable.

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The S&P 500 gained 0.8% for the week, the Dow rose 1.2%, the Nasdaq inched higher by 0.1%, and the Russell 2000 gave back 0.4%. Increased raw materials prices and supply play chain issues increased inflation expectations and steepened the US yield curve. The 2-year note yield increased by five basis points to close at 0.31%. The 10-year bond yield rose 15 basis points to 1.61%. One of the main culprits of increased inflation expectations is the price of oil, which traded north of $80 a barrel during the week. WTI prices increased by $3.55 or 4.6%, closing at $79.40 a barrel. Gold prices were little changed, closing at $1757.40 an Oz.

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The move in oil and the increase in yields promoted the energy sector and financials, which were up 5% and 2.3%, respectively. On the other hand, increased rates caused real estate to sell off 0.8% and caused some headwinds for large-cap growth names as lofty valuations were questioned.

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The September Employment situation report headlined economic data for the week. The Non-Farm Payrolls number was disappointing, coming in at 194k versus expectations of 420K. The miss allowed some to question the timeline of the Federal Reserve’s asset purchase programs taper. Private payrolls also missed the mark coming in at 317k versus the consensus estimate of 400k. The Unemployment rate came in at 4.8%, lower than August’s rate of 5.2%. Finally, Average hourly earnings came in a bit hot at up 0.6% the street was looking for 0.4%. The increase in wages also caused concern on the inflation front. ISM Non-Manufacturing came in better than expected with a 61.9% print. Initial claims and Continuing Claims also showed improvement coming in at 326k and 2,714 million, respectively.

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Darren Leavitt, CFA

Chief Investment Strategist

With over 20 years of experience in the market, Darren bring a diverse background with multiple areas of expertise. Throughout his career, Darren had held a variety of senior positions including Chief Investment Officer, Chief Financial Officer, Portfolio Manager, Senior Analyst, Senior Trader, and Financial Advisor.

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