Stocks
Equities were under pressure last week across the major global indicesdue to skepticism over the potential for a soft landing in the US and renewed upward pressures on energy prices(see Commodities below). The S&P 500 lost 1.26% while the Russell 2000 dropped 3.58% and the Nasdaq declined 1.92%. Overseas, the developed markets index (MSCI EAFE) was down 1.38% while the emerging markets index (MSCI EEM) declined 1.17%. In the US the best performing sectors were energy and utilities while the laggards were industrials and materials. By size small caps were the worst performers while value underperformed growth.1
Fixed Income
Interest rates rose and bond values fell, with the benchmark 10-year treasury rising 8 basis points to finish the week with a 4.26% yield. This marks a return to rates 2-3 weeks earlier2 around concerns for corporate profits after oil prices rose.
Commodities
The decision by Saudi Arabia and Russia to extend oil production cuts until the end of the year caused oil prices to spike Tuesday.3 West Texas crude oil futures ended the week at $87.51 per barrel. The US benchmark has now risen 28.5% since the start of June.4 Production cutbacks have resulted in many refiners producing too little diesel and jet fuel while producing too much gasoline. Meanwhile sub-par growth in the European Union5 together with weakness in China is weighing on demand.
Economic Data
Household wealth rose to a new peak in the second quarter, rising by $5.5 trillion to $154.3 trillion in the period due to gains in the value of homes and the stock market.6
The US services index rose 1.8 percentage points in August to a six-month high of 54.5, stronger than the median economist forecast of 52.4. The survey found that firms believed the second half of 2023 started to see some improvements over the first half.7 Meanwhile the US manufacturing index rose 1.2 percentage points, also to a six-month high. However, it remains below 50 – contracting for the 10th straight month in August as new orders remained sluggish. The pace of overall slowdown eased from July, led by upticks in production and employment.8
US motor vehicle sales in August were down 6.45% from July. Light truck sales— which include minivans, SUVs, and crossovers— accounted for 80% of total sales last month and year to date. Sales of light trucks were down 4.84% from the prior month with some of the slowdown reportedly due to a shortage of parts.9 Note the United Auto Workers union is planning to strike at all of the Big Three manufacturers at the end of this week.10
Company News11
Blackstone Inc. (BX), a Core Select and G50 holding, rose 7.83% last week after it was announced that the stock would join the S&P 500 prior to the opening of trading on September 18.12
Honda Motor Car Ltd. plc (HMC), a G40i holding, reportedAugust sales growth of 56.7% for its American Honda division and 61.3% growth for its Acura division into the US market, well ahead of expectations. The board also has scheduled a stock split on a 3 for 1 basis for shareholders of record on September 30. As a result, one Advance Depository Receipt will begin to equal 3 shares versus 1 share in the past.13 The price of the shares rose 3.77% for the week.
Did you know…
Coffee loses caffeine as it is roasted, so a dark roasted, “bold” cup of coffee actually has less caffeine than a lighter roast.
Mariann Montagne, CFA
Portfolio Management Consultant
Sources:
1 JP Morgan Weekly Market Recap 9-11-23
3 Reuters, “Crude Oil Uncertainty Paradoxically Equals Price Stability” 9-5-23
6 Federal Reserve Board of Governors 9-8-23
7 Institute for Supply Management 9-6-23
8 Institute for Supply Management 9-1-23
10 Washington Post, “Time is Running Out to Avert UAW Autoworkers Strike“ 9-7-23
11 All weekly changes in company stock prices: Yahoo Finance