Equities Rise During Volatile Week
Equities continued to be volatile last week with the largest two-day gain since March 2020 on Monday and Tuesday followed by three consecutive losing days. Despite the cool-off to end the week, global equities (represented by the MSCI All Country World Index) ended up 1.77%, and domestic stocks (represented by the S&P 500 Index) were up 1.56%.
Last week’s jobs report showed an addition of 263,000 jobs in September, slowing from August’s 315,000 but still remaining relatively strong. The unemployment rate dropped back to 3.5% from 3.7%. The signs of persistent labor market strength influenced market expectations for the peak fed funds rate as seen in the below image. Wage growth, however, seems to be moderating as average hourly earnings were up 5% on a year-over-year basis, down from March’s high of 5.6%.
Purchasing Managers Index
The Institute for Supply Management’s (ISM) Purchasing Managers Index (PMI) declined to 50.9 in September from 52.8 in August. With a reading over 50, the manufacturing sector continues its expansionary environment, but the lower reading continues to show moderation. The ISM manufacturing prices paid index showed a decline from the previous month and levels close to the beginning of the pandemic.
Consumer Price Index
This week we look ahead to September’s Consumer Price Index report for more insight into moderating inflation. Q3 earnings also picks up this week with big names like PepsiCo reporting mid-week and big banks scheduled for Friday. Markets will be focused on company performance amid high inflation, a strong US Dollar, and further earnings guidance.
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.