September 16, 2023

Weekly Market Commentary September 11th to September 15th 2023

Inflation data and retail sales were the main headlines for the week when the Consumer Price Index was released on Wednesday. Headline CPI showed prices increased 3.7% from last year, hotter than the expected 3.6% and higher than last month’s 3.2%. Month-over-month CPI met expectations at 0.6% and was higher than 0.2% from last month. Core CPI also met expectations at 4.3% and was lower than last month’s reading, although remains stickier than headline.

In addition to CPI on Wednesday, we also had the Producer Price Index come out on Thursday. PPI month-over-month increased by 0.7%, higher than the expected 0.4% and the highest MoM increase in over a year. Year-over-year PPI increased 1.6% versus 0.8% prior and 1.3% expected. The cost of gasoline increased 20% accounting for much of the rise.

August retail sales came in hotter than expected, increasing 0.6% compared to the 0.1% forecast, mainly driven by higher gasoline prices. However, control group sales were much softer, only increasing 0.1% as consumers continue to deal with dwindling savings, record credit card balances, and a softening labor market.

Initial jobless claims were 220,000 on the week, lower than the 225,000 expectation. The figure suggests higher employee retention than anticipated, however, expectations for rising claims amid a cooling labor market are still intact. Lastly, Empire State manufacturing survey expanded 21 points to 1.9 in September after contracting in August, driven by snapbacks in orders and shipments.

The equity markets made a failed attempt to move higher on the week, closing relatively flat. The S&P 500 index finished at 4,450 only down 0.16%, the Nasdaq finished at 13,708 down 0.39%, and the Dow Jones edged out a modest 0.12% gain closing at 34,618. Treasury yields rose on the week with the 2-Year U.S. Treasury closing 4bps higher to 5.03% and the 10-Year closing 6bps higher to 4.33%, the highest weekly close since 2007.

Next week we have the highly anticipated FOMC rate decision, along with data on housing, manufacturing, and services.

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