Equities Fall on Positive Economic Data

Equities Fall on Positive Economic Data

Equities fell during the holiday-shortened week as good news resulted negatively for stocks. Global equities (represented by the MSCI All Country World Index) were down -1.32%, and domestic stocks (represented by the S&P 500 Index) were down -1.26%.

PMI

During a relatively light economic data week, the Institute for Supply Management’s (ISM) Services PMI for August stood out as it reached its highest level since February and marked the 8^th consecutive month in expansionary territory. A main contributor to the jump was a faster pace of growth in new orders. ISM’s Manufacturing PMI released the Friday prior also showed an uptick but remains in a contractionary environment.

Labor and Unemployment

Following the previous week’s labor market update showing an uptick in unemployment from 3.50% to 3.80% in August, the weekly initial claims for unemployment fell to the lowest level since February and showing potential continued resilience in the labor market. Continuing claims for unemployment insurance also fell to the lowest level in two months.

Short Term Yields

The positive news sparked a quick rise in short-term yields as the 2-year treasury rate reached 5.01% on Wednesday, just short of its year-to-date high of 5.05% back in March. The 2-year rate retreated slightly the rest of the week and settled around 4.94%.

Inflation

This week an inflation report in the form of the Consumer Price Index will be released for August. For July, headline CPI showed the annual rate rise to 3.2% from 3.0% the month prior, but core (excluding food and energy) CPI fell slightly to 4.7% from 4.8%.

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.