Friday, October 22, 2021
Major U.S. and International Markets Finished Higher
The major equity markets finished solidly in the green this week as we head into the heart Q3 earnings season. International markets finished the week higher, as both developed markets (MSCI EAFE Index) and emerging markets (MSCI EM Index) were up, however they underperformed their counterparts in the United States. For the second straight week every sector, with the exception of communication services, finished the week higher as investors took advantage of oversold conditions resulting from last month’s market pullback.
Earnings, Earnings, Earnings
So far, less than 20% of companies have posted their 3rd Quarter results, however the vast majority of these reports have been better than expected, with approximately 80% of S&P 500 companies beating their estimates. Those who have reported so far have shown that firms have been able to work through supply chain/labor challenges that many industries are facing.
Fixed Income and Commodities Recap
Bonds Reverse Course While Commodities Ended Mixed
The Bloomberg Barclays Aggregate Bond Index finished lower, reversing last week’s positive return, as investors sold off bonds on the back of inflation concerns. High-yield corporate bonds, as tracked by the Bloomberg Barclays High Yield index, continued their run, finishing slightly higher for the second straight week.
Oil finished higher for the fifth straight week amid worldwide supply concerns, while natural gas’ price pulled back as some investors took profits from earlier run up. Silver finished higher for the second straight week as investors anticipated higher future demand as signs of broad economic improvement continue to emerge.
Economic Weekly Roundup
The Federal Reserve releases its Beige Book this week, which captures qualitative observations made by community bankers and business owners. It showed general optimism about the economic outlook despite moderating growth and elevated uncertainty. LPL analysis of sentiment around inflation and supply chain disruptions indicates that these concerns may be near their peak, however we still believe economic progress could take time.
Leading Economic Index
The Conference Board released its Leading Economic Index (LEI) report for September this week, showing the series rose slightly month over month. This reading represented the lowest rate of increase since February, which reflects a somewhat murky economic outlook, however the reading does still signal future growth is on the horizon.
Unemployment Claims Continue to Show Improvement
Initial claims for unemployment insurance fell for the second straight week, dropping to 290k. Moreover, continuing claims also reached a milestone this week, falling below 2.5 million for the first time since the start of the pandemic.
The following economic data is slated to be released during the week ahead:
- Tuesday: September building permits and new home sales, August Federal Housing Finance Agency Home Price Index, August S&P Case-Shiller Home Price Index, October consumer confidence
- Wednesday: September durable orders and wholesale inventories
- Thursday: Weekly initial and continuing unemployment claims, Q3 GDP, September pending home sales
- Friday: September Personal Consumption Expenditures, October University of Michigan sentiment
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