The Market Today

Amid Myriad Risks, Global Equities’ September Woes Worsen Ahead of FOMC

by Craig Dismuke, Dudley Carter

CORONAVIRUS UPDATE  Vining Sparks Coronavirus Chartbook and Vining Sparks Coronavirus State Charts



Homebuilder Confidence Kicks off FOMC Week: The only economic report on today’s calendar is the September NAHB homebuilder confidence index.  The index is expected to inch lower after dropping more than expected in July.

FOMC Focus: This week’s most anticipated event will be Wednesday’s Fed decision.  The most acute question is if they will announce a tapering of asset purchases or if they will wait given the confluence of escalating concerns.  The Delta variant remains an issue globally, aggravating persistent supply-side strains and authoring some signs of economic slowing at a time when inflation remains unusually high. The debt ceiling looms and stimulus discussions remain highly uncertain.  Government funding has yet to be resolved with a September 30 deadline before a government shutdown.  An unemployment insurance cliff is ongoing and a broader, fiscal cliff is on the horizon.  Moreover, the most recent nonfarm payroll report was quite disappointing. There are certainly reasons to believe the Fed will wait until November. However, the general expectation is that they will slow purchases before year-end barring any disastrous and unexpected economic, fiscal, or geopolitical outcomes.


Treasury Yields Pull Back as Global Equities’ September Woes Worsen Amid Myriad Risks: Global equities’ September slump worsened Monday, led by sharp declines in Hong Kong but with participation widespread across continents. Several major markets in Asia were closed for holidays, but those that were opened tumbled around 1.6% on average. Hong Kong’s Hang Seng fell 3.3% and has crumbled nearly 7% in September. Property stocks remain the heaviest drag in the region on concerns about the financial viability of a major Chinese developer and the risk it could be a canary in a coal mine for the industry. Stocks in Europe were down more than 2% at 7 a.m. CT and U.S. futures had declined by around 1.5%. The daily shift away from risk was weighing on commodities, supporting the U.S. Dollar and Japan’s yen, and driving global sovereign yields lower. Among the largest global declines, the 10-year Treasury yield fell 5.6 bps to 1.31%. The 5-year yield was 4.0 bps lower at 0.82% and the 2-year yield had dropped 0.8 bps to 0.21%.


ICYMI – September 17, 2021 Weekly Market Recap: The 10-year Treasury yield took a round trip last week after a softer-than-expected inflation report pushed yields lower early in the week, but a batch of better-than-expected economic reports gave evidence the economy is handling the Delta wave better than surmised. Headline CPI fell from 5.4% to 5.3% while core dropped from 4.3% to 4.0% as some of the most volatile, pandemic-affected categories fell: hotels, airfares, car rentals, and used cars. Absent outsized declines in those categories, prices remain broadly firmer-than-target.  Small business confidence in August was better than expectation.  The first glimpse into regional manufacturing activity each month, the New York and Philly Fed indices, both beat all economists’ forecasts for September.  Most convincingly, retail sales bettered forecasts once again, rising 0.7% MoM in August despite auto sales falling another 3.6%.  Excluding autos and gasoline, retail sales rose an even more convincing 2.0% and remain elevated after jumping on stimulus and reopening in March.  For the week, the 10-year yield opened at 1.34%, fell as low as 1.26%, and ended the week above 1.36%. The S&P 500 saw its second consecutive weekly decline, down 0.6%.  Click here to view the full recap

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