Weekly Recap | August 14, 2023

August 7-11, 2023 Recap

Major Indexes Mixed on the Week

S&P 500 Ends Lower Second Week
Equities finished mostly lower last week as only the Dow Industrials finished fractionally positive. Investors drew guarded relief from the July consumer inflation report that largely matched expectations. Friday’s above-forecast rise in producer prices, however, stirred caution but not enough to meaningfully alter views for a September Fed rate pause. Concerns over the market's ability to absorb increased Treasury supply were also a negative catalyst last week.

For the Week…
The S&P 500 fell 0.27%, capping a second week of declines. The Dow Jones Industrial Average gained 0.69% and the Nasdaq Composite lost 1.87%. It was the Nasdaq Composite’s first back-to-back weekly loss since its four-week pullback in December 2022.

Moody’s Downgrades Several Bank Ratings
Moody's cut the credit ratings on ten small and midsize banks and warned that it may downgrade six larger cap banks if conditions don’t improve, a further negative development that contributed to the risk-off tone earlier in the week.

Weekly Sector Insights
Surprisingly, eight of the 11 major S&P 500 sector groups finished positive last week with Energy (+3.54%) the top performer for a second straight week. Healthcare (+2.46%) also posted strong gains while Technology (-2.87%), Materials (-1.00%) and Consumer Discretionary (-0.99%) declined. (Sector performance doesn’t include dividends).

Treasury Yields Rise
The yield on 10-year Treasury notes ended Friday at 4.16%, its highest closing yield in nine months and up over 0.10% on the week. This week, investors were presented with a notable $103 billion in Treasury auctions. Tuesday's $42 billion auction of 3-year notes and Wednesday's $38 billion in 10-year notes were well received, but Thursday's $23 billion Treasury auction of 30-year bonds saw the lowest participation rate since April.

The Latest from @CeteraIM

Inflation Pressures Ease

Gasoline Up 22% YTD

Fed Funds Above Core CPI

Economic Calendar

Monday, August 14
Consumer Inflation Expectations.

Tuesday, August 15
Retail Sales, Import/Export Prices, Empire State Mfg, Business Inventors.

Wednesday, August 16
Mortgage Activity, Housing Starts/Permits, Industrial Production, FOMC Meeting Minutes.

Thursday, August 17
Jobless Claims, Philadelphia Fed Manufacturing, Leading Economic Indicators.

Friday, August 18
No Major Releases.

The inflationary downtrend continued in July. Headline and core CPI both increased by 0.2% month-over-month. The impact of base effects pushed CPI slightly higher year-over-year from 3.0% to 3.2%. On an annualized basis, CPI rose 2.6% over the last 6 months and only 1.9% over the last 3 months. The Fed isn’t ready to declare victory on inflation, but the disinflationary trend is encouraging. There will be one more CPI report before the Fed’s September meeting.

^{This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.}

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^Glossary

^{The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.} 

^{The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.} 

^{The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.} 

^{The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.} 

^{The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.} 

^{The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.} 

^{The Bloomberg US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.} 

^{The Bloomberg US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.} 

^{The Bloomberg US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.} 

^{The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.} 

^{The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.} 

^{The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.}

 ^{The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.}

 ^{The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.}

^{The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.}