Week from 13 to 19 September 2021
Wall Street slid again for the second-straight week, marked by the quadruple witching day. The bellwether S&P 500 ended down 0.57% while the Dow Jones Industrial Average was flat. Small cap stocks outperformed their large-cap counterparts (Russell 2000 up 0.42%). Tech shares pulled the Nasdaq Composite index into the red (-0.47%) as positive economic data lifted Treasury yields and increased uncertainty over the timing of the Feds tapering.
China turns lower with Evergrande on the brink of default
Chinese stocks stumbled amid slowing growth and increasing regulatory concerns. This time Beijing sought to tighten its grip on Macau, the worlds biggest gambling hub. Additionally, the real estate giant Evergrande stock took a nosedive (-30%). China’s most indebted developer, with more than $300 billion worth of liabilities, announced that it could default quickly, forcing the central bank to provide massive cash injection into the banking system to try to calm markets.
The Shanghai Composite index fell 2.41% accordingly. By contrast, most other Asian markets finished in positive territory (Japans Nikkei: +0.39%, Koreas Kospi: +0.47%, Indias Nifty: +.124%). In Europe, stock markets remained bearish (MSCI EMU: -0.97%, FTSE: -0.93%).
Materials and Utilities decline, Energy rebounds
The basic materials sector magnified its losses (-3.22%), with mining stocks adding pressure in the wake of an ongoing rout in commodities (copper futures down 4.63%, aluminum futures down 3.03%). Utilities also pushed the broader market lower (-3.11%) as well as industrials (-1.56%) and communication services (-1.24%), weighed down by Facebook (-3.69%). Information technology dropped 0.68% on worries of Fed tightening. Apple stocks were down 1.95% while Microsoft shares were up 1.41%, after the software giant raised its quarterly dividend by 11% and disclosed a new $60 billion buyback program.
Among the eleven S&P 500 sector indices, only two ended in the green. Energy (+3.31%) was the best performer thanks to higher oil and natural gas prices (WTI crude up 3.23%). Data indeed showed a larger-than-expected draw in weekly U.S. crude inventories. Consumer discretionary fared well too (+0.54%), though Amazon edged down 0.19%.
Slight rise in bond yields
Once again, U.S. and benchmark European government bonds closed lower. Yields on 10-year U.S. Treasury notes edged slightly higher from +1.341% to +1.363%. The 10-year Germany bond yield traded up 5bps at -0.28% while that of the 10-year France OAT closed above 0% (+0.053%).
Higher yields and stronger dollar (EUR-USD down 0.82%) hurt gold (spot price down 1.86% at $1,754.34/Oz), corporate investment grade bonds (-0.14% in Europe, -0.32% in the U.S.) and emerging debt (-1.31% in local currencies). In contrast, high yield bonds rose +0.19% in Europe and +0.10% in the U.S.
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