Weekly Market Commentary September 25th to September 29th 2023

Economic data was mixed this week, following the week where the Fed signaled a “higher for longer” interest rate forecast after its September meeting. Starting on Tuesday, New Home Sales for August came in down 5.8% continuing the trend in the downtrodden real estate sector. The expectation was that this number would be negative, but nowhere near as big. Durable Goods Orders was next and we saw a rebound from the previous month. Both Durable Goods and Durable Goods Ex-Transportation came in positive and slightly higher than consensus. However, the prior month for both figures were revised down from the previous month. Consumer Confidence dropped slightly for September, coming in at 103.0 vs. August’s revised 108.7.

The third and final cut of Q2 GDP was also released and to no one’s surprise, it remained constant at +2.1%. Based on strong consumer spending, look for Q3 to possibly come in significantly higher at 4% or more when this data is released in October. Q3 GDP will go a long way in determining if the Fed will pause rate increases or boost them one more time before year’s end. Also released Wednesday was the Weekly Initial Jobless Claims which came in at 204,000. This frontline measure of corporate employment strength had been trending towards 250,000 in the past few months but lately has come back down to the 200,000 range, another signal the Fed will be looking at regarding rate decisions.

Finally, the biggest release of the week was the Personal Consumption Expenditure (PCE) data for August. Both headline month-over-month and year-over-year figures came in higher than July’s, but when energy prices were stripped out, both of those figures fell from the previous month. The PCE Core Deflator month-over-month came in at 0.1% when July’s was 0.2%; while the year-over-year came in at 3.90% when July’s figure was 4.20%. The Fed will likely take these results as a positive step towards their long, drawn-out battle against inflation as the PCE data is one of their closely followed measures.

In the financial markets, with a government shutdown looming, the S&P 500 and Dow Jones Industrials indices were both off on the week at -0.7% and -1.3% respectively. The tech-heavy NASDAQ Composite finished basically flat on the week. Bond yields were mixed on the week with the 2-Year U.S. Treasury yield closing down at 5.03%; the 10-Year finishing up at 4.59%; and the 30-Year also higher at 4.73%

Key economic releases next week include the September employment report and ISM Manufacturing & Services indices.