AMERIPRISE FINANCIAL, INC.
U.S. stocks enjoyed their best weekly gain since July last week, as the S&P 500® Index rose 1.8 percent. In the process, the index recaptured its 50-day moving average, after spending two weeks flirting with its 100-day moving average. Investors chose to overlook the rise in the September consumer price index from 5.3 to 5.4 percent, and another almost $3 a barrel increase in the price of oil. The focus instead was on solid third quarter bank earnings, which set a positive tone to the start of earnings season, and core inflation which was unchanged at 4.0 percent.
So far in the month of October, the S&P 500 has climbed 3.8 percent, reversing its September slump, and now sits just 1.4 percent below its September 2nd record closing high of 4536.95. Only communication services among the index's eleven sectors suffered a loss last week, pressured lower by a decline in Facebook, which accounts for 20 percent of the group. Otherwise, there were gains across the board, led by materials, real estate, and consumer discretionary, each of which rose by 3.5 percent or slightly better. Healthcare and consumer staples lagged.
Although the last two monthly employment reports have been disappointing, the weekly jobless claims data continues to be encouraging. Last week, initial claims fell below 300,000 for the first time since March, 2020 just before surging above 6 million. Continuing claims followed suit. The claims data will likely reinforce the view that the Fed's threshold of substantial further progress toward full employment is being met, paving the way for a taper announcement in two weeks. The minutes from the Fed's September meeting did little to suggest otherwise.
Retail Sales Show Surprising Strength; Consumer Sentiment Softens
The other major economic release last week, retail sales, surprised in terms of its strength. Despite the persistent parts problems among motor vehicle manufacturers, car sales rose for the first time in five months. The September gauge rose 0.7 percent, defying expectations of a 0.2 percent decline. And the August report was revised upward.
Conversely, consumer sentiment softened. The October preliminary report from the University of Michigan showed a modest decline, following an uptick in September. It was the third decline in the past four months and has been accompanied by a corresponding increase in the expected pace of inflation twelve months out, rising from 4.2 percent in June to 4.8 percent in October. More encouragingly, however, the 5-10 year expected rate of inflation has remained anchored at 2.8 percent, as consumers seem to agree with the Fed and investors more generally that the current rise in inflationary pressures will ultimately prove to be temporary. To be sure there are others, perhaps a growing minority, who are concerned that inflation will persist for longer than the general consensus.
The ten-year Treasury note yield fell four basis points to 1.57 percent, in what was a holiday shortened week for bonds. The dollar also eased slightly after five straight weeks of gains, and the VIX index eased back to its lowest close since mid-August at 16.4 after having started the month at 21.2.
Earnings Season Ramps up this Week; China Shows Weak Economic Growth
After a better-than-expected start from the big banks, earnings season ramps up this week. According to Factset, the blended earnings growth rate for the quarter has climbed to 30.0 percent from 27.5 at the end of September. And expected revenue growth has edged up to 15.1 from 15.0 percent. The regional and smaller banks on the calendar this week will be watched for any signs of the elusive increase in lending. A full 16 percent of the S&P 500 is scheduled to report results this week, including names beyond banking such as Netflix, J&J, IBM, American Express, Intel, Verizon, American Express, and Proctor and Gamble.
Overseas, China reported 0.2 percent economic growth in the third quarter, half the pace that was expected. The year-over-year growth rate fell to 4.9 percent, down from 7.9 percent at the end of the second quarter. Aside from the pandemic induced recession in 2020, this was the lowest twelve-month growth rate in China in 30 years. Energy shortages, economic re-engineering, the Delta variant, and supply chain disruptions have all conspired to pressure economic activity lower. For these same reasons the IMF last week lowered its 2021 global GDP forecast to 5.9 percent from its 6.0 percent July forecast.
Important Disclosures:
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances.
Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Ameriprise Financial. It is given for informational purposes only and is not a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.
Investing involves risk including the risk of loss of principal.
A 10-year Treasury note is a debt obligation issued by the United States government that matures in 10 years. The 10-year yield is Stock investments involve risk, including loss of principal. High-quality stocks may be appropriate for some investment strategies. Ensure that your investment objectives, time horizon and risk tolerance are aligned with investing in stocks, as they can lose value.
The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan.
The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) is a widely used measure of market risk. It shows the market's expectation of 30-day volatility. The VIX is constructed using the implied volatilities of a wide range of S&P 500 index options. VIX values greater than 30 are generally linked to a large volatility resulting from increased uncertainty, risk and investors' fear. VIX values below 20 generally correspond to stable, stress-free periods in the markets.
Past performance is not a guarantee of future results.
An index is a statistical composite that is not managed. It is not possible to invest directly in an index.
Definitions of individual indices and sectors mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section, or through your Ameriprise financial advisor.
Third party companies mentioned are not affiliated with Ameriprise Financial, Inc.
Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.
Ameriprise Financial Services, LLC. Member FINRA and SIPC.
So far in the month of October, the S&P 500 has climbed 3.8 percent, reversing its September slump, and now sits just 1.4 percent below its September 2nd record closing high of 4536.95. Only communication services among the index's eleven sectors suffered a loss last week, pressured lower by a decline in Facebook, which accounts for 20 percent of the group. Otherwise, there were gains across the board, led by materials, real estate, and consumer discretionary, each of which rose by 3.5 percent or slightly better. Healthcare and consumer staples lagged.
Although the last two monthly employment reports have been disappointing, the weekly jobless claims data continues to be encouraging. Last week, initial claims fell below 300,000 for the first time since March, 2020 just before surging above 6 million. Continuing claims followed suit. The claims data will likely reinforce the view that the Fed's threshold of substantial further progress toward full employment is being met, paving the way for a taper announcement in two weeks. The minutes from the Fed's September meeting did little to suggest otherwise.
Retail Sales Show Surprising Strength; Consumer Sentiment Softens
The other major economic release last week, retail sales, surprised in terms of its strength. Despite the persistent parts problems among motor vehicle manufacturers, car sales rose for the first time in five months. The September gauge rose 0.7 percent, defying expectations of a 0.2 percent decline. And the August report was revised upward.
Conversely, consumer sentiment softened. The October preliminary report from the University of Michigan showed a modest decline, following an uptick in September. It was the third decline in the past four months and has been accompanied by a corresponding increase in the expected pace of inflation twelve months out, rising from 4.2 percent in June to 4.8 percent in October. More encouragingly, however, the 5-10 year expected rate of inflation has remained anchored at 2.8 percent, as consumers seem to agree with the Fed and investors more generally that the current rise in inflationary pressures will ultimately prove to be temporary. To be sure there are others, perhaps a growing minority, who are concerned that inflation will persist for longer than the general consensus.
The ten-year Treasury note yield fell four basis points to 1.57 percent, in what was a holiday shortened week for bonds. The dollar also eased slightly after five straight weeks of gains, and the VIX index eased back to its lowest close since mid-August at 16.4 after having started the month at 21.2.
Earnings Season Ramps up this Week; China Shows Weak Economic Growth
After a better-than-expected start from the big banks, earnings season ramps up this week. According to Factset, the blended earnings growth rate for the quarter has climbed to 30.0 percent from 27.5 at the end of September. And expected revenue growth has edged up to 15.1 from 15.0 percent. The regional and smaller banks on the calendar this week will be watched for any signs of the elusive increase in lending. A full 16 percent of the S&P 500 is scheduled to report results this week, including names beyond banking such as Netflix, J&J, IBM, American Express, Intel, Verizon, American Express, and Proctor and Gamble.
Overseas, China reported 0.2 percent economic growth in the third quarter, half the pace that was expected. The year-over-year growth rate fell to 4.9 percent, down from 7.9 percent at the end of the second quarter. Aside from the pandemic induced recession in 2020, this was the lowest twelve-month growth rate in China in 30 years. Energy shortages, economic re-engineering, the Delta variant, and supply chain disruptions have all conspired to pressure economic activity lower. For these same reasons the IMF last week lowered its 2021 global GDP forecast to 5.9 percent from its 6.0 percent July forecast.
Important Disclosures:
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances.
Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Ameriprise Financial. It is given for informational purposes only and is not a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.
Investing involves risk including the risk of loss of principal.
A 10-year Treasury note is a debt obligation issued by the United States government that matures in 10 years. The 10-year yield is Stock investments involve risk, including loss of principal. High-quality stocks may be appropriate for some investment strategies. Ensure that your investment objectives, time horizon and risk tolerance are aligned with investing in stocks, as they can lose value.
The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan.
The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) is a widely used measure of market risk. It shows the market's expectation of 30-day volatility. The VIX is constructed using the implied volatilities of a wide range of S&P 500 index options. VIX values greater than 30 are generally linked to a large volatility resulting from increased uncertainty, risk and investors' fear. VIX values below 20 generally correspond to stable, stress-free periods in the markets.
Past performance is not a guarantee of future results.
An index is a statistical composite that is not managed. It is not possible to invest directly in an index.
Definitions of individual indices and sectors mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section, or through your Ameriprise financial advisor.
Third party companies mentioned are not affiliated with Ameriprise Financial, Inc.
Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.
Ameriprise Financial Services, LLC. Member FINRA and SIPC.
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Ameriprise Financial Inc. published this content on 18 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 October 2021 21:21:07 UTC.
