John Hancock: Weekly Market Recap Week Ended September 16th

Inflation’s persistence

With another U.S. Federal Reserve interest-rate hike looming, Tuesday’s Consumer Price Index release showed that key drivers of inflation aren’t settling down, despite a decline in August’s annual rate to 8.3% from 8.5% the previous month. Excluding volatile food and gas prices, core inflation rose to a higher-than-expected 6.3% from 5.9%.

Yield streak

The yield of the 10-year U.S. Treasury bond climbed for the seventh week in a row, reaching around 3.45% on Friday. The yield is up from 3.32% at the end of the previous week and from 2.64% at the end of July. The yield curve remained inverted, as the 2-year Treasury yield rose to about 3.87% on Friday—its highest level since 2007.

Shrinking earnings

Expectations have recently diminished for the next batch of U.S. corporate earnings results that will begin coming out in mid-October. Analysts surveyed by FactSet expect that third-quarter earnings for companies in the S&P 500 will rise by an average of 3.7% relative to the same quarter a year earlier. That’s down from expectations of 9.8% growth when analysts were surveyed at the end of June.

Fed ahead

The latest monthly inflation report increased the likelihood that the U.S. Federal Reserve will lift its benchmark interest rates by three-quarters of a percentage point—or perhaps even by a full point—in its upcoming meeting ending on Wednesday. At both its June and July meetings, the Fed approved hikes of three-quarters of a point—the biggest since 1994—pushing the benchmark rate to its current range of 2.25% to 2.50%.

Source: https://wmr.jhinvestments.com/