US and International Equities
The S&P 500 finished lower this week, breaking its streak of three consecutive weekly gains. Energy, utilities, communication services, and financials were this week’s sector leaders. Technology was this week’s biggest decliner, pulling back over 2%. Given technology’s pullback, large cap value topped its growth counterpart.
The S&P 400 mid cap and Russell 2000 small cap indexes were relative bright spots in the US equity markets this week, outperforming large caps as well as the technology-laden Nasdaq. The Russell 2000 has enjoyed a solid run over the past month.
“Historically, small caps have typically led the inception of an economic recovery and given their recent market leadership, this could potentially be proof of a new economic expansion,” said LPL Financial Chief Investment Officer Burt White.
For more of our thoughts on small caps, please read last week’s Weekly Market Commentary titled Three Reasons We Like Small Caps.
Looking overseas, emerging market equities, as denoted by the MSCI Emerging Markets (EM), outperformed their developed counterparts (MSCI EAFE) by almost 1%. For the year, emerging markets, led by China, have outperformed international developed markets.
Fixed Income, Currencies, and Commodities
Bonds, as represented by the Bloomberg Barclays US Aggregate, finished lower as Treasury yields rose for the week. Commodities posted mixed results for the week. Gold and silver moved in opposite directions whereas natural gas was the big standout, returning over 7% for the week.
US and International Economic Data Recap
Initial jobless claims fell to under 790,000, well below Bloomberg estimates for 870,000. Continuing claims also beat economists’ expectations, falling for the fourth straight week to 8.4 million vs estimates of over 9.5 million, according to the US Department of Labor.
The Conference Board released its Leading Economic Index (LEI), which revealed that the blistering pace of economic growth seen during the summer was slowing as the fourth quarter began. While the economy doesn’t appear to be at risk of contracting, the LEI results may touch on the importance of additional fiscal stimulus to maintain consumer confidence. LPL Research took a closer look at the LEI with our blog post today titled Leading Indicators Show Showing Pace of Economic Recovery.
The qualitative assessment of the economy in the Federal Reserve’s (Fed) Beige Book revealed that the post-lockdown recovery continued, albeit at a slower pace than we saw over the summer. As we head into the fourth quarter, sentiment may play a larger role in the path of the recovery, and it may get an extra lift as soon as election uncertainty has passed. LPL Research took a further look at the Beige Book with our blog post on October 22nd titled Beige Book Shows Pace of Recovery Moderating.
Next week, the following economic data is slated to be released:
- On Monday, we get September building permits and new home sales data from the US Census Bureau.
- On Tuesday, the Conference Board October Consumer Confidence Index, September Durable Orders, and August S&P/Case-Shiller home price index data will be published.
- Wednesday is all about the October wholesale inventories.
- Thursday provides investors with the much-anticipated third quarter GDP report, as well as another weekly initial unemployment claims report. September National Association of Realtor’s pending home sales are reported.
- We end the week with October’s Michigan Sentiment, September’s personal income and consumption expense data.
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