Ah, the stock market. It’s like that unpredictable friend who’s the life of the party one minute and a Debbie Downer the next. Last week was no exception. The major indices were on a bit of a joyride, with the S&P 500 finally cozying up above its 50-day moving average. The week started strong, but then it was like someone let the air out of the balloon towards the end. Still, the indices managed to clock in four consecutive winning sessions by Wednesday. So, what’s the deal?

Table of Contents

The Numbers Game

Let’s talk turkey. The Vanguard Mega Cap Growth ETF (MGK) soared by 3.6%, while the Invesco S&P 500 Equal Weight ETF (RSP) wasn’t too shabby either, rising by 2.3%. On the flip side, the 2-year note yield took a nosedive, falling 17 basis points to 4.88%. The 10-year note yield wasn’t far behind, dropping seven basis points to 4.17%.

The Economic Seesaw

Economic data was like a lukewarm cup of coffee—neither too hot nor too cold. Reports like the August Consumer Confidence Index and July JOLTS – Job Openings Report were mixed. But here’s the kicker: the market actually liked the “meh” data. Why? Because it hinted that the Federal Reserve might keep its hands off the interest rate button for a while.

Sector Highlights

Energy: A 7.8% surge in WTI crude oil prices to $85.55/bbl had the S&P 500 energy sector grinning from ear to ear with a 3.8% gain.
Tech and Communication: The information technology and communication services sectors were the cool kids on the block, posting gains of 4.4% and 3.5%, respectively.
Consumer Staples and Utilities: These sectors played the role of party poopers, closing the week in the red.

Earnings Galore

Salesforce (CRM) was the belle of the ball, impressing everyone with its quarterly results and guidance. On the other hand, Dollar General (DG) and Five Below (FIVE) were like the guests who overstayed their welcome, sinking after below-consensus guidance.

The Labor Day Pause

Just a heads-up, folks! The equity and bond markets took a breather on Monday for Labor Day. So, if you were wondering why Wall Street was quieter than a church mouse, that’s why.

Final Thoughts

Is the Fed Playing Coy?: The market seems to think that the Fed won’t raise rates. But can we really trust this sentiment?
The Oil Factor: With oil prices surging, should we be worried about inflation rearing its ugly head again?
The Earnings Puzzle: Companies like Salesforce are killing it, but others are struggling. What does this mean for the overall market health?

So there you have it—a week on Wall Street that was as unpredictable as a cat on a hot tin roof. Hold onto your hats, folks. The next ride on this rollercoaster is just around the corner.

CALENDAR & MOVERS

Tuesday, Factory Orders (MoM) (July)
Wednesday, Services PMI (August)
Fed Talk
China Economy
Oil (Energy Sector)

Ah, September! As we roll into this month, investors are getting a bit of a breather with a holiday-shortened week, especially after last week’s data dump. But don’t get too comfy—there’s still some meaty stuff on the menu. The main course? A crucial update on the U.S. services sector from the Institute for Supply Management. This sector has been the engine of economic growth for the past year, but lately, it’s showing signs of running out of steam.

At the same time, the Federal Reserve’s Beige Book is set to drop. This tome gives us a snapshot of economic activity across all 12 of the Fed’s districts. Why should you care? Well, it’s like reading the tea leaves for what the Fed might do next in terms of monetary policy. So, keep your eyes peeled; these updates could be game-changers for the Fed’s upcoming decisions later this month.

Key Points to Watch:

Services Sector Update: This has been the backbone of economic growth but is showing signs of fatigue.
Fed’s Beige Book: A comprehensive look at economic activity that could influence the Fed’s next moves.

China’s Rocky Road to Recovery

Switching gears and looking eastward, China’s also got a slew of economic indicators coming out this week. And let’s say, the forecast isn’t all sunshine and rainbows. We expect updates on the service sector and trade levels early in the week. Spoiler alert: They’re likely to show a slowdown, thanks to dwindling demand in export markets.

But wait, there’s more! Later in the week, China will roll out the big guns with August’s Consumer and Producer Price Indexes. Despite the Chinese government’s best efforts to juice the economy, there’s a dark cloud hanging overhead: the rising risk of debt. This looming threat is likely to put the kibosh on any aggressive stimulus measures, leaving the economic outlook as clear as mud.

What to Keep an Eye On:

Service Sector and Trade Levels: Expected to continue their downward trend.
Consumer and Producer Price Indexes: Could offer insights into the effectiveness of stimulus measures.

Oil Prices: A Slippery Slope for Disinflation?

Last but not least, let’s talk oil. Last week, the black gold hit a seven-month high, making investors do a happy dance. Both WTI and Brent Crude shot up by over 6%, marking the biggest weekly gains in nearly half a year. What’s fueling this rally? Concerns about tightening supply, for starters.

Investors are betting that Saudi Arabia will extend its voluntary 1 million barrel per day production cut into October. This move would be in line with ongoing supply restrictions by OPEC and its buddies. On the home front, demand is skyrocketing, with crude oil inventories taking a nosedive in five of the past six weeks.

Sounds great for oil bulls, right? But hold your horses. Economists are sounding the alarm that this could throw a wrench in the ongoing trend of disinflation. In other words, while the oil market might be booming, it could be a double-edged sword for the broader economy.

Points of Concern:

Supply Outlook: Saudi Arabia’s potential extension of production cuts could tighten supply further.
Demand Surge in the U.S.: Crude oil inventories have been declining, indicating a surge in demand.
Impact on Disinflation: Rising oil prices could become a significant headwind for disinflationary trends.

Wrapping It Up

So there you have it, folks. Whether you’re eyeing the U.S., keeping tabs on China, or sweating over oil prices, this week promises to be a rollercoaster ride for investors and economists alike. Each of these economic indicators carries its own set of implications, and together, they paint a complex picture of global economic health—or lack thereof. Keep your seatbelts fastened; it’s going to be a bumpy ride.

BONDS

Rising Yields and Federal Reserve Stance: Last week saw notable shifts in the bond market, particularly in U.S. Treasury yields. Both 10-year and 30-year Treasury yields increased, affecting bond prices negatively. This rise was especially pronounced following the release of new jobs data. Despite higher unemployment figures, the Federal Reserve is expected to maintain its current rates. Market predictions indicate a 90% chance of a rate pause in September, adding another layer of complexity to bond investments.

Borrowing Estimates and Fixed Income Sectors: The U.S. Treasury has updated its borrowing estimates on the supply side. It plans to borrow $1.007 trillion in privately held marketable debt for the third quarter of 2023, marking an increase from previous estimates. In terms of performance, positive returns were observed across various fixed income sectors. Municipal and Treasury yields both increased, and the Federal Reserve’s “higher for longer” rates strategy is having an impact on inflation control.

Inflation and Rates: The Federal Reserve has been aggressive in its approach to combating inflation. It has raised rates 11 times since March 2022, leading to 10-year yields exceeding 4%. This has made fixed income securities more appealing to some investors, especially those looking for higher returns in a rising rate environment.

COMMODITIES

Oil & Energy

The fluctuating oil prices are capturing the attention of certain oil-producing nations like Iran, Iraq, and Venezuela. These countries are contemplating ramping up their domestic production, which could counterbalance the production-cutting tactics employed by Saudi Arabia and Russia to bolster prices.

As a result, the cost per barrel has seen a consecutive two-week dip, although the decline is relatively modest. Brent and WTI prices fell by roughly 1% over a five-day period, settling at $83.9 and $80, respectively. In the realm of natural gas, prices experienced significant volatility, largely influenced by the ongoing negotiations between Woodside and labor unions. While an agreement has been reached between the two, other Australian unions are now considering strikes. Europe’s benchmark, the Rotterdam TTF, currently hovers around 34 EUR/MWh.

Precious Metals & Gold

Both industrial and precious metals are in a phase of recovery. In the base metals sector, all eyes are on Beijing, which is once again implementing measures to stimulate its economy, thereby driving up metal demand.

Copper prices on the LME have climbed to $8,350 per ton. Meanwhile, the value of gold is closely tied to the Federal Reserve’s monetary policies and, indirectly, to U.S. Treasury bond yields. The precious metal is also making gains, currently priced at $1,916 per ounce.

CRYPTOCURRENCY

As of this writing, Bitcoin has found a stable footing, oscillating close to the $26,000 level. In contrast, Ether is experiencing a slight downturn, declining by 1.5% since the start of the week and currently trading near the $1,650 mark. Since late June, the cryptocurrency market has struggled to sustain the bullish momentum it enjoyed earlier in the year. This stagnation can be attributed to a combination of factors, including economic uncertainties, stricter regulatory measures in the U.S., and an absence of sector-specific positive drivers.