Weekly Market Commentary September 13th to September 17th 2021
Consumers showed resilience in the month of August despite fears that the Delta variant may halt spending. Retail Sales increased 0.7%, far outpacing the expected decline of -0.8% as back to school shopping provided a lift to the economy and consumers returned to online spending, which jumped 5.3%. However, the pandemic’s impact was felt at bars and restaurants and within the auto industry as sales came in flat and dropped -3.6%, respectively. Excluding the more volatile items, Retail Sales Control Group increased a healthy 2.5%, an encouraging sign for third quarter GDP.
U.S. Consumer Prices (CPI) cooled in August, posting its smallest gain in seven months. The Index increased 0.3% as prices for the most transitory items fell, including a -9.1% drop in airfares and a decline of -1.5% in used car prices. However, nagging energy prices continued to tick higher and are now 25% higher than year ago levels. Although the debate whether inflation is transitory is far from over, the Fed should feel slightly vindicated after this report.
Import prices confirmed what we saw in CPI; inflationary pressures in the month of August eased. Falling -0.3% last month, August marked the third consecutive month of slowing prices for the index as a stronger dollar helped U.S. companies. Although the month of August was promising, we still anticipate supply chain issues to maintain upward pressure in materials, semiconductors, and construction machinery sub-industries.
September is living up to its reputation as typically the worst month for stocks. Equity indices fell for the second consecutive week with the Nasdaq leading the decline, finishing down -0.8% at 15,044. The S&P 500 (-0.6%) and DJIA (-0.1%) followed the Nasdaq’s lead lower.
Despite the sensation of “volatility” we have experienced over the past two weeks, the VIX still barely sits above 20, a historically low number. In the fixed income market, the yield on the 10-year U.S. Treasury was up slightly at 1.37%.
Next week’s important releases include Housing, Manufacturing data and the Federal Reserve’s rate decision and meeting.