Most of the major indexes recorded gains and reached new highs last week, during the busiest of the third-quarter earnings reporting season. Several technology and internet-related giants announced results, which helped keep trading volumes elevated. Consumer discretionary shares fared best within the S&P 500 Index, boosted by a jump in Tesla shares—bringing the firm’s market capitalization above $1 trillion—following news that rental firm Hertz Global agreed to buy 100,000 of its electric vehicles. Energy shares underperformed, as oil prices fell back from multiyear highs. Supply chain problems appeared to remain at the forefront, with both Amazon.com and Apple falling back and dragging the indexes lower on Friday morning after reporting lower growth forecasts because of labor and input shortages.
Despite the spotlight on earnings, investors also appeared to react to political and economic factors. Strength early in the week was attributed to progress on the Biden administration’s social infrastructure plan. The White House said that President Biden made progress on the spending bill following a Sunday meeting with West Virginia Senator Joe Manchin—a key swing vote—who reportedly was open to a $1.75 trillion package. Stocks retreated on Wednesday, however, and Manchin expressed new reservations over tax increases and other provisions in the plan related to climate policy and paid parental leave. President Biden revealed the “framework” of a $1.75 trillion deal on Thursday, but whether Manchin and other reluctant Democrats would support it remained unclear by the end of the trading week.
Stocks regained their footing on Thursday, despite some mixed economic data. The Commerce Department revealed its advance estimate that the economy expanded at an annualized rate of 2.0% in the third quarter, a sharp slowdown from the previous quarter’s 6.7% pace and below consensus estimates of roughly 2.7%. A decline in auto sales and a slowdown in spending on food services and accommodations—seemingly due to the delta variant of the coronavirus—were largely to blame. Pending home sales also fell unexpectedly. On the bright side, weekly jobless claims fell modestly more than consensus to a new pandemic-era low of 281,000.
Investors also appear to be reassured that the flipside of slowing growth appears to be moderating inflation pressures. The Fed’s preferred inflation gauge, the core (excluding food and energy) personal consumption expenditures index, rose 3.6% over the annual period, slightly below consensus and unchanged from the prior month’s pace. Of course, food and energy are essentials, and some are starting to feel like those receiving the prophetic words from Haggai: “’You have sown much, and harvested little. You eat, but you never have enough; you drink, but you never have your fill. You clothe yourselves, but no one is warm. And he who earns wages does so to put them into a bag with holes.’ Thus says the Lord of hosts: Consider your ways” (Haggai 1:6-7). To that end, surveys are showing an increase in short-term consumer inflation expectations. The coming holiday shopping season, from turkeys to topcoats, will certainly provide ample opportunity to see if these expectations are in line.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposes of avoiding penalties that may be imposed by law. Each tax payer should seek tax, legal or accounting advice from a tax professional based on his/her individual circumstances.
This material is for informational purposes only. Neither APFS nor its Representatives provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions. Information has been obtained from sources believed to be reliable and are subject to change without notification. The information presented is provided for informational purposes only and not to be construed as a recommendation or solicitation. Investors must make their own determination as to the appropriateness of an investment or strategy based on their specific investment objectives, financial status and risk tolerance. Past performance is not an indication of future results. Investments involve risk and the possible loss of principal.