WEEKLY SUMMARY: The Nasdaq is down for the 2nd week in a row
US equity indices ended mixed for the week, as investors weighed inflation data against worries over the recent rise in long-term interest rates. Volumes were generally light. Value stocks handily outperformed growth stocks; the Dow managed a modest gain while the Nasdaq was down (-2%) for the 2nd straight week (1st time since December.). Healthcare outperformed while technology stocks underperformed on worries that rising rates would reduce the value of future profits. Financials stocks sold off briefly on Tuesday morning after Moody’s lowered its credit ratings for 10 small- and mid-cap banks and placed six other entities on downgrade watch. Shares in the sector recovered to some degree as the week progressed, however. On the macro side, US CPI rose 0.2% in July, bringing its y/y increase to 3.2%, a tick below expectations. Meanwhile, US producer prices rose 0.3% in the month, a tick above expectations. The week also brought a somewhat mixed inflation outlook from Federal Reserve officials. US Treasury yields moved higher over the week. European stocks ended little changed while Italy’s government spooks markets with windfall tax on banks. In Asia, Japan’s stock markets rose over a holiday-shortened week. Chinese stocks retreated as mounting evidence that the country’s recovery may have peaked weighed on sentiment. China’s latest inflation data revealed that consumer and producer prices fell in tandem for the 1st time since November 2020, underscoring the weak demand in China.
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The S&P 500 Index and the Dow Jones both moved to record highs over the week, helped by some upside surprises to kick off earnings season. Shares in JPMorgan Chase and Wells Fargo rose on Friday after they reported smaller-than-feared declines in Q3 profits. A solid rise in NVIDIA shares helped growth stocks outperform value stocks and compensate for a decline in Google parent Alphabet. Tesla was also weak following a skeptical response to the company’s highly anticipated unveiling of its new “robotaxis” and “robovans.” The earnings focus arguably offset several disappointing economic reports over the week: headline and core (less food and energy) inflation rose in September by 0.2% and 0.3%, respectively, both a tick above expectations.