U.S. and International Equities
Major Markets Mixed
The major equity markets finished the week mixed as inflation worries continued to play a role in investors’ minds amid an excellent third quarter earnings season. International equities, as represented by the developed international (MSCI EAFE) and emerging markets (MSCI EM), lost ground as COVID-19 cases rebounded in Europe. Concerns over China’s continued regulatory crackdown and its economic trajectory also weighed on investor sentiment.
This week, growth names performed well compared to their value counterparts on the back of higher COVID-19 cases worldwide as potential lockdowns could spur increased business for the stay-at-home stocks.
Earnings, Earnings, Earnings
Earnings have been quite exemplary considering the challenges companies are facing as supply chain disruptions and materials and labor shortages affect the global economy. As we conclude quarterly reporting season, earnings are tracking to an almost 40% year-over-year increase for the third quarter, 12 percentage points above the October 1st consensus estimate. On average the largest upside surprises came from the energy, financials, and utilities sectors.
This week’s results from big-box retailers, which could be seen as being directly affected by supply-chain issues, mostly beat analysts’ expectations.
Bonds Reverse Course
The Bloomberg Aggregate Bond Index finished lower for the second consecutive week as yields increased on inflation concerns. Moreover, high-yield corporate bonds, as tracked by the Bloomberg Barclays High Yield index, sold off for the second straight week as well.
Commodities Finish Slightly Lower
Natural gas prices rallied this week, however they only retraced approximately a quarter of last week’s pullback. Oil finished breakeven after having dropped for three straight weeks as weekly inventory data showed more supply build than anticipated. Both gold and silver pulled back this week on profit taking after two consecutive higher weeks for the metals.
Economic Weekly Roundup
Solid October Retail Sales
Amid inflation concerns along with the Delta variant, the consumer remains resilient. October retail sales again bested expectations, producing the largest monthly gain since March. Moreover, September retail sales were revised higher, further surpassing economists’ expectations.
Leading Economic Index Point toward Moderate Growth
The Conference Board released its October Leading Economic Index (LEI) this week, showing a rebound from September. Year-over-year growth, at over 9%, accelerated for the first time since April, indicating low odds of a recession occurring in the next 6 months. Please read more about last month’s LEI through the LPL Research blog post Leading Indicators Show Tempered Optimism For Economy.
Unemployment Claims Steady
Initial claims for unemployment insurance were reported at over 260,000 for the week ending November 13. The report came in slightly above expectations. The four-week moving average of claims has now fallen to near 270,000, which is the lowest since the pandemic began. That being said, this is still about 50,000 above pre-March 2020 levels.
The following economic data is slated to be released during the holiday-shortened week ahead:
- Monday: October existing home sales
- Tuesday: November Markit Purchasing Managers Index (PMI)
- Wednesday: Weekly initial and continuing unemployment claims, October building permits, personal consumption expenditures, personal income, new home sales, wholesale inventories, November University of Michigan sentiment, Federal Open Market Committee (FOMC) minutes
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