A weekend rally allowed the S&P 500® index to return to its 100-day moving average, relieving some of the anxiety caused by the 5% pullback between September 2sd and the 30e. The index was even lower for the entire week, falling 2.2%, its third weekly decline in the past four. Friday’s rally on the first day of October sparked some optimism that the market may put September’s weakness behind, historically the weakest month of the year. Friday’s rally was led by the sectors most sensitive to the economy.

Anticipation of a move on the fiscal policy front last week fizzled out as Democrats failed to reach agreement on the final size of the social infrastructure package proposed by the 3,500 president. billions of dollars. The negotiations appear to be centered on a smaller package of around $ 1.5 billion to $ 2.0 billion. House leaders were forced to postpone voting on the $ 1 trillion hard infrastructure bill that has already been passed by the Senate, until the end of October, well beyond the end of October. initial objective of September 7. Congress, however, passed a continuing resolution to maintain the federal government. government operating until December 3. No progress has been made on raising the debt ceiling as the Treasury is expected to run out of cash on October 18.

A string of negative headlines made a tough week for the Fed

It wasn’t a good week for the Federal Reserve either. For an institution that relies on the explicit trust of investors and ordinary citizens, the regional Federal Reserve bank chairmen of Boston and Dallas retired on Monday after it was reported that the two had engaged in corporate actions which, although apparently within the framework of the Fed’s ethical guidelines, raised the appearance of impropriety. And on Friday, Bloomberg reported that Fed Vice President Clarida did something similar in 2020, at the start of the Fed’s emergency response to the pandemic. And on Tuesday, Massachusetts Senator Warren called Fed Chairman Powell a dangerous man to lead the Fed due to her record of regulatory oversight of the banking system, saying she would oppose his re-appointment. Powell’s term expires in January.

It was also not a great week for the Fed in terms of mounting inflationary pressures, which the Fed continues to believe will prove to be transitory. The August PCE core deflator, the Fed’s preferred inflation indicator, has remained at 3.6% over the past twelve months, its highest level in 30 years. The overall rate reached 4.3%, down from 4.2% in July, also the highest in 30 years. Nonetheless, the surge in bond yields that began after the Fed meeting two weeks ago peaked earlier in the week, before moderating. The yield on the ten-year Treasury bill closed on Friday at 1.46%, after hitting 1.56% on Tuesday. Before the Fed meeting, it stood at 1.30%. The two-year note followed a similar path, peaking at 0.29% on Thursday, before ending the week at 0.27%. Before the Fed meeting, it stood at 0.22%. At the start of the session this week, they returned 1.50 and 0.27% respectively.

Economic activity generally appears healthy; Investors await September jobs report this week

Otherwise, it was a generally good week for the economy. Durable goods orders in August beat expectations and September’s ISM manufacturing report rose for the second month in a row, following a moderating trend since the end of the first quarter, although it remained at a low high throughout. Personal spending rebounded in August from a decline in July, and home prices remained firm in July, while pending home sales rose in August. However, all was not firmer. The Conference Board’s consumer confidence survey fell for the third consecutive month in September, although the University of Michigan’s consumer sentiment survey rose for the first month in three, following a sharp drop in August. Motor vehicle sales fell for the fifth consecutive month, leaving them 34% below April’s level. And initial jobless claims rose for the week in a row, albeit modestly.

This week’s economic calendar is headlined by the September Jobs Report. The Bloomberg consensus forecasts the creation of 470,000 new non-farm jobs, double the September total. The unemployment rate is expected to drop slightly to 5.1%. President Powell said the Fed had “almost” reached its target for progress in the labor market. This week’s jobs report will be the last the Fed sees before its November meeting, but a report that is close to consensus would appear to pave the way for the start of tapering.

Important disclosures:
Opinions expressed are as of the date indicated, may change based on market trends or other conditions and may differ from views expressed by other associates or affiliates of Ameriprise Financial. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether on its own behalf or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into account the individual situation of investors.

Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but the accuracy and completeness cannot be guaranteed by Ameriprise Financial. They are given for information only and do not constitute a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.
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A 10-year Treasury bill is a debt obligation issued by the United States government that matures in 10 years. The 10-year yield is generally used as an indicator of mortgage rates and other measures.

The ISM manufacturing index, also called the purchasing managers index (PMI) is a manufacturing estimate for a country, based on approximately 85% to 90% of total Purchasing Managers Index (PMI) survey responses each month. It is considered a key indicator of the state of the US economy.

The personal consumption expenditure (PCE) Measures of the prices that people living in the United States pay for goods and services. The PCE price index is known to capture inflation (or deflation) across a wide range of consumer spending and to reflect changes in consumer behavior.

The Consumer confidence index (CCI) is a survey that measures the degree of optimism or pessimism of consumers about their expected financial situation. It is based on consumers’ perceptions of current business and employment conditions, as well as their business, employment and income expectations for the next six months.

The Michigan Consumer Sentiment Index (MCSI) is a monthly survey of consumer confidence levels in the United States. It is a statistical measure of the overall health of the economy as determined by consumer opinion. It takes into account people’s feelings about their current financial health, the health of the economy in the short term, and the prospects for long-term economic growth, and is widely regarded as a useful economic indicator.

Past performance is no guarantee of future results.

An index is a statistical composite that is not managed. It is not possible to invest directly in an index.

Definitions of the individual indices mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Information on Ameriprise Research section, or through your Ameriprise financial advisor.

The third-party companies mentioned are not affiliated with Ameriprise Financial, Inc.

The investment products are not insured by the Federal Government or the FDIC, are not deposits or bonds of, or guaranteed by any financial institution, and involve investment risks, including possible loss of principal and fluctuation in value.

Ameriprise Financial Services, LLC. FINRA and SIPC member.


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