October 11-15, 2021 Recap
Equity Gains Accelerate
Earnings Season Starts Strong
U.S. stocks posted accelerated gains last week as investors set aside inflation fears and welcomed strong earnings data that helped to reinforce continued economic growth. Headline consumer inflation may likely remain elevated through the first quarter of next year, averaging over 5.5% before easing to under 3% by this time next year. The S&P 500 registered it best week since July.
For the Week…
The S&P 500 gained 1.84% last week after rising 0.83% the week prior, the Dow Jones Industrial Average gained 1.58% for its best week since June, and the tech-heavy Nasdaq Composite advanced 2.18% – its best week since the end of August.
Consumer Spending Still Alive
Domestic retail sales surprised higher last month, climbing 0.7%, topping expectations for a 0.2% decline. Following a near 1% gain in August, consumer spending remains strong despite supply shortages and higher prices, with supports coming from higher wage growth and an elevated savings rate.
10 of the 11 major sector groups posted gains last week, led by Materials (+3.65%), Consumer Discretionary (+3.55%) and Real Estate (+3.53%). Technology (+2.61%) trailed as fourth-best performer, while Healthcare (+0.84%) rose the least and Communication Services (-0.43%) edged lower.
Treasury Yields Ease
Treasury prices edged slightly higher last week amid concerns over a global energy crunch caused mostly by shortages. The benchmark 10-year Treasury yield slipped to 1.56% from 1.61% the week prior. The U.S. Dollar Index weakened by 0.14% last week. Also for the week, U.S. West Texas Intermediate (WTI) crude oil futures surged another 3.7% to end Friday at $82.
Monthly core CPI inflation (consumer price index excluding food and energy) eased over the last two months, benefitting from transitory reopening categories like airfare and car rental prices falling. A rising concern, however, is the uptick in shelter costs, which account for roughly 40% of core CPI. Owners’ equivalent rent is a proxy for housing consumption costs, and this category rose 0.43% last month, the highest since June 2006.
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.