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U.S. Stocks Declined as Economic Growth Slows

Market Data as of Week Ending: 9/10/2021 unless noted otherwise

Equities

U.S. stocks declined as economic growth slows from the recent spike in coronavirus cases and a combination of persistent supply and labor challenges. Investors will soon start to shift attention toward the next quarterly cycle of financial reporting. The S&P 500 is expected to deliver a 27.9% earnings growth rate for the third quarter. Larger companies outperformed small and mid-sized peers and growth stocks generally outperformed their value counterparts. All major economic sectors were down for the week with losses most notably in the real estate, health care, and industrials sectors. The consumer discretionary sector was the best performing sector followed by communication services, and a few defensive sectors such as consumer staples and utilities. Developed foreign stocks in Europe and Asia outperformed U.S. stocks while Emerging Market stocks narrowly lagged developed foreign markets.

Bonds

U.S. Treasury yields generally moved higher as the 10-year ended the week at 1.34%. Longer duration government and corporate bonds recorded gains for the week as investors looked for safety to offset some of the risk in other assets. Long-term corporate bonds were the best performing segment and intermediate-term government bonds lagged the most. Investment grade corporate bonds ended the week with yields at just over 2.0% and high yield corporate bonds are approximately 4.6%.

Macroeconomic Data

Economic data released during the week has increased concern for some investors that economic growth may have peaked in the first half of the year. The Federal Reserve revealed through their reporting that economic growth slowed in August and was largely attributable to a reduction in dining, travel, and tourism in most parts of the country. Despite slower economic activity, businesses continue to face higher input and production costs as supply has not been able to keep up with demand. Producer Price Inflation (PPI) rose 8.3% from a year ago, which is the largest increase in more than 10 years. On the positive side, weekly jobless claims reached another new recovery low of 310,000 even though the figure remains elevated compared to the weekly average of 218,000 back in 2019.

 

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