U.S. Stocks Pull Back on Inflation and Interest Rate Fears

Market Data as of Week Ending: 10/01/2021 unless noted otherwise


U.S. stocks fell last week, ending September in negative territory, breaking a seven-month winning streak and rounding out the worst monthly decline since the onset of the pandemic. Investor sentiment seemed to be weighed down by inflation and interest rate fears as many viewed the Fed’s policy statement in a hawkish light. Small cap stocks outperformed both their larger sized peers and value stocks outperformed their growth counterparts by a wide margin. Sector performance was mixed as more cyclical and economically sensitive sectors such as energy and financials held up well. Information technology and traditionally defensive sectors such as health care and real estate finished the week with losses. Developed foreign stocks in Europe and Asia underperformed U.S. stocks while Emerging Market stocks outperformed both.


U.S. Treasury yields jumped last week as the 10-year hit a 3-month high before ending the week at 1.46%. U.S. Treasury bonds sold off as inflation and a more hawkish Fed increased expectations for an accelerated tapering and rate hike timeline. Short and intermediate government and corporate bonds eked out small gains while the sudden rise in yields put pressure on long duration bonds. Investment grade and high yield corporate bond yields remained relatively flat and ended the week with yields above 2.1% and 4.6%, respectively.

Macroeconomic Data

Economic data released during the week delivered mostly mixed results as investors’ focus remained intent on Friday’s inflation reading. Durable goods orders increased 1.8% in August as the increase in flying and rebound at Boeing gave a boost. U.S. consumer confidence fell to 109.3, marking a seven-month low, as the spread of delta and inflation has weighed on consumers. Jobless claims jumped to a two-month high due to a surge in California. Consumers continued to increase their spending in August, jumping by 0.8%, but only saw their incomes rise a modest 0.2%. The cost of what consumers are purchasing rose sharply again in August as the personal consumption expenditure price index climbed 0.4%. The Eurozone’s been impacted by inflation as the Bank of England (BoE) Governor Andrew Bailey said that UK gross domestic product probably won’t recover to pre-pandemic levels until early next year—a few months later than previously predicted.




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