October 1, 2021

Weekly Market Commentary September 27th to October 1st 2021

Durable Goods Orders rose 1.8% in August, well ahead of the consensus estimate. July orders were revised higher as well by 0.6%. Excluding transportation components, orders rose 0.2%, below consensus. New Orders grew faster than shipments in most categories, reconfirming supply chain bottlenecks creating further backlogs.

Second quarter GDP was revised up by a tenth of a percent as expected to a rock solid 6.7%. Personal Consumption Expenditures (PCE) rose by 0.8% in August, although items facing supply chain constraints like motor vehicles and appliances declined by -0.4%. Nondurable items such as back to school supplies were positive as were expenditures on services. The year-on-year increase was 4.3%, modestly higher than the previous reading, while the Core (ex food and energy) was steady at 3.6%.

Pending Home Sales surprised to the upside, supported by still attractive mortgage rates and modestly higher inventories of homes for sale. Home buyers remain active despite excessive home price increases this year. Overall Consumer Confidence as measured by the Conference Board has however declined for a third straight month as the spread of the Delta Variant continues to extend the global health crisis. Elevated food and energy prices are likely weighing on consumers as well.

Initial Jobless Claims rose by a higher-than-expected level last week, the third consecutive week of increases for regular new unemployment claims. The four-week moving average was up 4,250 claims to 340k. This is the first increase to this measure in the past six weeks.

The S&P 500 pulled back by -2.2% on the week to 4,357, in a broad-based retreat after an early week sell off of large cap growth stocks. The technology-focused Nasdaq Composite declined by -3.2%. The yield on the 10-year U.S. Treasury finished the week close to where it started at 1.47% after running up to 1.56% in intra-week trading.

Key economic releases next week include Nonfarm Payrolls, Initial Jobless Claims and Factory Orders.