Weekly Market Update: September 19, 2023

I. What Moved Markets Last Week

  • Stocks fell last week, with risks rising from the UAW auto strike as well as from chip equipment makers following a report that Taiwan Semiconductor was delaying deliveries, raising concerns about weak consumer demand. Adding to the weakness was rising oil prices, which have pushed past $90 per barrel to 2023 highs. Rising Treasury yields continue to weigh on stocks, with the benchmark 10-year yield climbing to 4.32%. The Dow managed to finish the week up 0.1%, but the S&P 500 and Nasdaq closed their second straight week of losses, down by a respective 0.2% and 0.4% as per Bloomberg data.
  • International markets mostly finished up last week after the European Central Bank raised interest rates but signaled that borrowing costs may have reached a peak. Better economic data out of China also appeared to lift investor sentiment.
  • Core CPI rose 0.3% m/m in August, while energy prices drove the headline CPI up 0.6% according to the Bureau of Labor Statistics. Retail sales and producer prices both rose by more than forecast, driven by higher fuel costs that risk tempering household spending and keeping inflation elevated. The value of total retail purchases increased 0.6% from July following downward revisions for the prior two months as per Commerce Department data. Excluding gasoline, sales climbed a more modest 0.2%.
  • The latest OPEC data shows global oil markets will face a supply shortfall of more than 3 million barrels a day next quarter — potentially the biggest deficit in more than a decade — as Saudi Arabia extends its production cuts. If realized, it could be the biggest inventory drawdown since at least 2007 according to a Bloomberg analysis of figures published by OPEC.
  • According to the Census Bureau and Bloomberg data as of July 2023, Mexico has now displaced China as the number one trade partner of the U.S.. This is a factor that can add to inflation over the next several years as the global landscape re-shapes to a new global order.

 II.     Looking Ahead

  • The September FOMC meeting is the highlight of the week. Expect the Federal Reserve to pause but suggest that there could be another rate hike at the November or December meeting. All eyes will be on the Summary of Economic Projections, which is updated quarterly and includes the “Dot Plot” showing the range of the committee’s forecasts of the federal funds rate for the next several years. 
  • Economic reports include updates on housing starts, crude oil inventories, and initial jobless claims.
  • The week could also see some extra drama on the political front as the countdown continues toward a potential government shutdown at the end of the month as well as the United Auto Workers union strike.