September 13 - 17, 2021 Recap
Modest Declines In Equity Markets
Narrow Losses for Stocks
The three major U.S. equity indexes all had modest weekly declines with the Dow Jones Industrial Average not able to eke out a gain. Economic data released last week showed retail sales unexpectedly rising, while jobless claims and consumer sentiment missed expectations. Chinese stocks retreated on Friday as the largest property developer there may be struggling to make interest payments this week to its borrowers. This has investors concerned about China’s broader real estate market and the trickle-down impact for a possible default. The company has $305 billion in total obligation.
For the Week…
The S&P 500 declined by 0.54%, the Dow Jones Industrial Average fell 0.05% and the tech-heavy Nasdaq Composite lost 0.46%. The S&P 500 has been down eight of the last 10 trading days entering this week.
Consumer Prices Wane
There was less inflation than expected in August. The headline Consumer Price Index (CPI) rose 0.3% month-over-month (vs. 0.4% expected). The less volatile Core CPI, which excludes food and energy, rose 0.1% (vs. 0.3% expected), the smallest gain since February. Consumer prices are still elevated from a year ago with the headline CPI slipping to 5.3% year-over-year, while the core CPI rose 4.0% year-over-year, below forecasts for 4.2%. Positively, used vehicle prices fell 1.5% for the first time since February, while airfares fell 9.1%.
Eight of 11 Sectors Decline
Eight of the 11 major sector groups declined last week with Materials
(-3.19%), Utilities (-3.04%) and Industrials (-1.56%) retreating the most. Energy (+3.32%) and Consumer Discretionary (+0.55%) were the only gainers on the week.
Treasury Prices Flat
Treasury yields ticked up slightly from the prior week as the 10-year Treasury yield climbed from 1.35% to 1.37%. Prices move inversely to yields, so the prices of 10-year Treasury bonds fell a small amount. The yield curve was mixed with such small changes. 30-year Treasury bonds rose in price. It was really the middle of the Treasury Yield curve that had slight losses (3-10 year maturities).
The S&P 500 dividend yield and 10-year Treasury yield fell below 1.30% last week, which never happened prior to this year. The average yield since 2000 is 3.24% for 10-year Treasury notes and 1.83% for the S&P 500. The low yield environment is impacting stocks and bonds.
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.