October 25-29, 2021 Recap
Equities Cap Fourth Straight Weekly Gain
Earnings Season Continues Strong
U.S. stocks climbed the last week in October, with the S&P 500 notching its longest weekly winning streak since April. Impressively, thanks to a stellar start to the third quarter earnings season, this year’s biggest pullback, a 5.2% drop from September 2 to October 4 – was fully recouped by October 20 (just 12 trading days). All three major U.S. equity indices ended the week and month at fresh all-time highs. The performance came despite earnings disappointments from two of the five-largest U.S. companies. This helps explain the Dow Industrial’s more muted gains last week.
For the Week…
The S&P 500 gained 1.35% last week, the Dow Jones Industrial Average rose just 0.40% and the tech-heavy Nasdaq Composite jumped 2.72%. The S&P 500 finished Friday at its 59th all-time high this year.
Early 3Q Earnings Insights
With results now in from 279 S&P 500 companies, third quarter earnings are surpassing analysts’ estimates by 10.3% with 80% of firms topping analysts’ projections. S&P 500 companies are delivering double-digit earnings beats for the sixth straight quarter; however earnings are substantially stronger in Financials and Cyclicals than in Technology.
Consumer Discretionary Tops Leaderboard
Seven of the 11 major sector groups posted gains last week, led by Consumer Discretionary (+3.98%), Communication Services (+2.04%) and Technology (1.98%). Financials (-0.84%) and Energy (-0.63%) declined the most.
Treasury Yields Rebound
Treasury prices rallied again last week, dampening yields amid inflationary pressures. Month-ending data showed that the Fed’s preferred inflation gauge rose 4.4% in September from a year ago, the fastest annual pace since 1991. For the week, the benchmark 10-year Treasury yield see-sawed down nine basis points (-0.09%) to 1.55%. The U.S. Dollar Index strengthened by 0.51% last week. U.S. WTI crude oil futures were little changed on the week, ending Friday at $83.57/barrel (+$0.15).
Monday, November 1
Construction Spending, ISM and IHS Markit Manufacturing PMIs.
Tuesday, November 2
No Major Releases.
Wednesday, November 3
Mortgage Activity, ADP Private Sector Jobs, ISM & IHS Markit Services PMIs, FOMC Rate & Policy Decisions.
Thursday, November 4
Jobless Claims, U.S. Trade Deficit, Worker Productivity & Costs.
Friday, November 5
Nonfarm Payrolls, Unemployment Rate, Hourly Earnings.
This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.
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The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.
The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.
The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.
The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.
The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.
The Bloomberg Barclays US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.
The Bloomberg Barclays US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.
The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.
The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.
The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.
The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.
The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.
The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.