Stocks Up Modestly; Bonds Down on Inflation Data
Good morning,
The Dow (+1.2%), NASDAQ (+1.1%), and S&P 500 (+1.1%) each exhibited modest gains last week. On the contrary, taxable bonds and tax-free municipal bonds lost about 0.5% for the week, as the 10-year Treasury yield rose 0.10% to finish the week at 4.08%.
Key inflation data – Consumer Price Index (CPI) and Producer Price Index (PPI) – were reported last week, and demonstrated that inflation seems to be ticking back up again. Both indices showed that inflation was higher than analysts’ expectations, causing the bond market to retreat. That sent the 10-year Treasury yield above the 4% mark for the first time since July. On a related note, the Fed meeting minutes were released and showed that several members of the Fed committee were in favor of a smaller interest rate cut last month. Combined with inflation creeping back up, this suggests that the hopes for a sharp Fed rate cut in early November is in jeopardy.
Stocks rose last week as quarterly corporate earnings season kicked off with a couple large banks reporting strong earnings for the 3rd quarter. That helped send stocks higher, as investors will be focusing on corporate earnings, but more importantly, the forecast of future earnings by corporations. Retail sales for September will also be reported this week, which should provide an indication of consumer’s confidence as we head into the holiday season. Lastly, the weekly jobless claims numbers will be reported on Thursday, but those numbers are expected to be skewed by the hurricanes hitting Florida and the Southeast US the past couple weeks.
Have a great day and terrific week!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
