All data is for the week ended September 15, 2023
Stocks
US stocks were slightly lower last week while overseas markets advanced. The S&P 500 declined 0.12% as the Russell 2000 declined 0.20% and the Nasdaq was down 0.37%. The international developed markets index (MSCI EAFE) rose 1.67% while the emerging markets index (MSCI EM) added 1.27%. Utilities and consumer discretionary were the best performing sectors while technology and industrials were the laggards. Value stocks outperformed growth stocks, and large-caps were the best performers by size.1
Fixed Income
The likelihood of an interest rate increase when the Federal Reserve meets this week has diminished to about a 5% chance. However, interest rates rose last week, and bond prices fell as investors digested sales and inflation data that may have diminished expectations for a rate cut by the Fed over the coming year. (See Economic Data below.) Yields on the 2-year, 10-year and 30-year government issues rose by 4-9 basis points to 5.02%, 4.33% and 4.42% respectively.2
Overseas, the European Central bank raised its borrowing rate for the 10th consecutive time in an effort to bring down inflation. The central bank raised its key lending rate by 25 basis points as officials cut their growth forecasts for the economy. Interest rates for the 10-year German bonds rose just 7 basis points to 2.67%1 as the European Central bank signaled that this rate hike would be its last for some time.3
Commodities
The price of West Texas crude oil rose another 2.87% last week to $90.02 per barrel. Falling global inventories amid a tightening market with the OPEC-plus and Saudi production cuts driven oil prices higher for three consecutive weeks.4 Additionally, China’s latest industrial output report showed faster-than-expected year-over-year growth in August, although manufacturing growth was modest on a month-over-month basis.5
Economic Data
The consumer price index rose by 0.6% in August or 3.7% on a year-over-year basis, slightly ahead of the consensus estimate. More than half of the monthly increase in inflation was driven by a recent jump in oil prices. After excluding volatile food and energy prices, the index rose a more modest 0.3% on a month-over-month basis,6 in line with expectations. This core rate, annualized, is 2.4% based on the last three months- closing in on the Fed’s 2% goal.
Retail and food service sales rose 0.6% in August versus July and 2.5% from a year ago. Total sales for the June 2023 through August 2023 period were up 2.2% from last summer’s report. Gasoline stations were down 10.3% from last year, while food services and drinking places were up 8.5%.7
Company News8
CVS Health (CVS), a G50 holding, shares rose 7.64% on positive comments from its CEO that expectations are high for a government upgrade to its Medicare Advantage PPO plan for next year based on internal data. The ratings are generally released in October.9
Netflix (NFLX), a Contrarian Choice, Core Select and G33 holding, announced that it is not seeing the positive impact on advertising revenues that it had expected from instituting tiers of subscribers based on ads and pricing.10 Shares fell 10.36% for the week.
Did you know…
The modern length of a marathon, which is 26.2 miles, was established in 20th-century London as the distance between Windsor Castle and the Olympic Stadium, after which the marathon became an official Olympic event. Prior to this, marathon distances were arbitrary and varied by several miles.
Mariann Montagne, CFA
Portfolio Management Consultant
Sources:
1 JP Morgan Weekly Market Recap 9-18-23
3 European Central Bank 9-14-23
5 Nikkei Asia, “Economy-China“ 9-15-23
6 Bureau of Labor Statistics 9-13-23
8 All weekly changes in company stock prices: Yahoo Finance
9 MSN.com, “CVS Health CEO Optimistic About Medicare Advantage Plan Ratings” 9-13-23
10 NEXT TV.com, “Netflix Ad Business Still in the Crawling Phase” 9-13-23