Stocks finished higher last week, even as Treasury yields
climbed to their highest level since 2007. The economy continued to show
strength, with growth boosting profits but keeping pressure on inflation and
rates. The picture isn•t all rosy, though, as September•s consumer sentiment
data showed a decline amid inflation concerns.
Here•s how the market finished last week and the stories
behind the numbers.
Stock Index Performance
- The S&P 500 rose 1.21%.
- The Nasdaq 100 jumped 3.25%.
- The Dow Jones Industrial Average edged up 0.28%.
Headlines Behind the Numbers
Growth accelerates, and bonds slide. Business
activity grew at its fastest pace in more than five years. Bond traders read
that strength as a warning about inflation, and the 10-year yield rose above
5.2% late in the week. Traders now see roughly a two-in-three
chance that the Federal Reserve raises rates another quarter point in
October. Higher yields mean costlier mortgages and car loans, adding strain for
households already dealing with higher prices.
Prices rise as sentiment falls. Business costs for
materials and services are rising at the fastest pace since October 2022, with
fuel and freight leading the climb. Companies tend to pass those costs on to
customers, and households are feeling the effects. Consumer
sentiment fell further, and expected inflation for the coming year jumped
to 4.6% from 4.0%. Steady paychecks and rare layoffs keep people spending for
now. However, if sentiment continues to slide, that spending could slow.
Oil prices ease. West
Texas Intermediate (WTI) crude, the U.S. benchmark, settled at $92.41 a
barrel, down 7.9% for the week. The drop could help relieve pressure on gas
prices but does not resolve the current price problems. Another disruption
could push fuel costs back up and give the Fed one more reason to raise rates.
The Week Ahead
Two releases
will test whether last week•s concerns deepen or fade. Wednesday•s (September
30th) Personal Consumption Expenditures (PCE) data, the Fed•s preferred
inflation gauge, will offer a closer look at whether inflation is softening or
remaining sticky. Friday•s (October 2nd) jobs numbers, the first since the Fed
raised rates in mid-September, will also provide key data on the economy's
health. Softer hiring and wage growth would likely pull yields lower, which
would lift bond prices. A hotter reading would likely push yields back up,
since investors would expect more Fed hikes.
