Hello, I’m Greg Curvall, Senior Portfolio Manager with Fifth Third Bank.
Major US equity indices were notably lower last week, with the S&P 500 logging its fourth weekly decline in the past five. Treasuries were weaker with the U.S. 10-year finishing the week at 3.45 percent. The 2-year at one point climbed as high as 3.9 percent. The dollar index was up, gold was down, still near a two-year low despite historic inflation. WTI crude logged its third consecutive weekly decline, dropping 1.9 percent amid continued concerns about weakening global demand.
The market was in risk-off mode last week, with a hotter-than-expected August CPI inflation report on Tuesday sparking a big selloff. The S&P 500 logged its worst session since June 2020, raising fears of a more-aggressive Fed. It also somewhat undercut economic "soft landing" hopes, which had been cited as a source of support of late.
At the same time, the World Bank issued a warning that aggressive tightening is increasing the odds of a global recession. Moreover, while there has been some talk about earnings resilience and the bar seems to have been lowered for the third quarter, the week saw numerous negative announcements from more cyclical names. Nevertheless, last week's news was not uniformly bad, with surveys pointing to a continued decline in consumers' inflation expectations and China easing Covid restrictions.
Away from the main themes, there was limited news flow of note. Despite a lot of press focus, fears of a nationwide railroad strike evaporated after Washington helped secure a tentative labor agreement, as many analysts had expected.
There was a lot of attention last week on Ukraine's surprisingly successful counteroffensive, though this has not been a big driver for markets. There was also somewhat more political-talk about the coming government-funding debates and November's midterms, though these are not yet front-burner issues for the market.
Looking ahead to this week, the economic calendar is fairly light. We get some housing data early in the week, with Housing Starts on Tuesday and Existing Home Sales on Wednesday. Also on Wednesday, and by far the most anticipated economic event of the week, the Federal Reserve is expected to raise the Fed Funds rate another 75 basis points, though there is increasing chatter of a full percentage-point move. Then we finish up the week with the Leading Indicators Index on Thursday and the Purchasing Manager’s Index, or PMI, on Friday.
As always, we will be watching and reporting back to you next week. Thank you.