THE WEEK ON WALL STREET Stocks prices were whipsawed last week, dragged initially lower by financial contagion worries and later lifted by a supportive Fed policy statement. The Dow Jones Industrial Average gained 0.62%, while the Standard & Poor’s 500 advanced 0.51%. The Nasdaq Composite index was flat (+0.02%) for the week. The MSCI EAFE index, which tracks developed overseas stock markets, ticked higher by 0.20%. A WILD WEEK Last week began with a sharp sell-off on contagion concerns that the financial difficulties of a large, debt-laden Chinese property developer could spread to other parts of the global financial system. This added to an existing list of worries that included Delta variant infections, slowing economic activity, debt ceiling brinkmanship in Washington, and Fed tapering uncertainty. By mid-week stocks bounced back strongly on news that downgraded the risk coming from China and a Fed announcement that its bond purchases would continue, though it did anticipate a moderation in such purchases coming soon. When the dust settled, a week that had appeared set for losses ended in small gains. The Federal Reserve concluded its FOMC (Federal Open Market Committee) meeting last week, announcing that it may start tapering its monthly bond purchases soon, perhaps as early as November, and could raise rates sometime next year. Fed Chair Jerome Powell provided further detail in a subsequent press conference, saying that bond purchases may end entirely by the middle of 2022. The support for hiking interest rates also increased, with half of the 18 Fed officials expecting interest rates to be higher by the close of next year, up from just seven who thought similarly in June. The Fed also cut its GDP growth projection to 5.9%, compared with its June estimate of 7%, while raising its inflation forecast from 3% to 3.7%. THE WEEK AHEAD: KEY ECONOMIC DATA Monday: Durable Goods Orders. Tuesday: Consumer Confidence. Thursday: Jobless Claims. Gross Domestic Product (GDP). Friday: ISM (Institute for Supply Management) Manufacturing Index. Tuesday: Micron Technologies, Inc. (MU). Wednesday: Cintas Corporation (CTAS). Thursday: McCormick & Company (MKC), CarMax, Inc. (KMX) FINAL THOUGHTS This week is fairly quiet and the market will most likely trade off headline news and the nfrastructure deal working through Congress. If you ask my opinion, the infrastructure deal is a tealth way to raise taxes as tax hikes are buried in the bill. Earnings season picks back up next eek and the market will look for guidance from the reporting companies as to how they think their businesses will perform in the quarters ahead. |
THIS WEEK'S UPDATE
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September 28, 2021
