S&P 500 members continued to post robust third-quarter earnings reports, staying on track to grow EPS by 32.7% year-over-year. Over 84% of the reporting companies topped analysts’ forecasts. The damage from a few that disappointed was reasonably confined. The much-anticipated cryptocurrency ETF debuted. Economic data gave no cause for alarm.

The parade of impressive third-quarter earnings continued in the second week of the reporting season. Health care and financial companies led the way. According to FactSet, 84% of S&P 500 companies reporting earnings have topped analysts’ EPS forecast.

Blending actual EPS for those reporting with estimates for those to follow, third-quarter profits are on track to grow 32.7% year-over-year, higher than 27.5% analysts forecasted on September 30.

Concerns of component and labor shortages affecting holiday season sales and Internet advertising emerged after semiconductor chipmaker Intel and communication services company Snap Inc. disappointed with their earnings reports.

Yet, the damage from these worries did not spill over beyond the communication services sector. Investors felt relieved many companies are maintaining profit margins by passing on higher costs to customers.

The widely-anticipated ProShares Bitcoin Strategy ETF began trading last Tuesday and garnered over $1 billion in assets by the end of the week.

In economic data, existing-home sales rose more than expected. Initial unemployment benefit claims dropped to a new pandemic low, suggesting an improving job market.

For the week ending October 22, the S&P 500 (SPY) rose 1.6%. All of the 11 sectors gained.
 

Leaders and laggards for the week ending October 22, 2021.

Real estate (XLRE), health care (XLV), and financials (XLF) outperformed the S&P 500, gaining 2.8% or more.

Communication service (XLC), consumer staples (XLP), and materials (XLB) lagged the benchmark.

Market breadth was positive. The number of advancing stocks in the S&P 500 led the number of decliners by a 4-to-1 ratio.

The S&P 500’s top 10 winners included consumer discretionary, financials, information technology and health care companies.

1. Consumer Discretionary

Pool Corp. (POOL) +11% – The world’s largest swimming pool products distributor was the top performer in the S&P 500 for the week. Pool Corp. shares surged after the company’s third-quarter sales and EPS grew by 24% and 55%, respectively, to set new records. The company raised the mid-point of its 2021 EPS forecast range by nearly 8%.

Automotive parts retailer Advance Auto Parts (AAP), online marketplace Etsy Inc. (ETSY), and electric-vehicle maker Tesla Inc. (TSLA) were the other winners, gaining 8-9% each. Tesla’s stellar quarterly results drove its shares past the $900 mark for the first time.

2. Health Care

Anthem, Inc. (ANTM) +10% – The nation’s second-largest health insurer raised its 2021 profit guidance. It also forecasted the pandemic to have a lower impact on 2022 profits as infections decline and more people get vaccinated.

Medical devices maker Abbott (ABT) rose 8% after posting impressive quarterly results and raising its full-year EPS forecast.

3. Financials

SVB Financial Group (SIVB) +9% – The parent of Silicon Valley Bank posted decent quarterly performance metrics. Loans and net interest income rose 21% and 17%, respectively, while provisions for credit losses fell 20%.

Diversified financial institution PNC Financial Services (PNC) gained 9% in a delayed reaction to its October 15 earnings report, supported by the broad rally in the banking group.

4. Information Technology

HP Inc. (HPQ) +8% – The PC and printer maker allayed fears of sales slowing down due to peaking demand and supply constraints. HP raised its quarterly dividend by 29% and its fiscal 2022 EPS guidance by 8% above analysts’ forecast.

Business technology retailer CDW Corp. (CDW) gained 8% after announcing a deal to buy Sirius Computer Solutions for $2.5 billion. The buyout bolsters CDW’s service capabilities in hybrid infrastructure, digital innovation, security, and cloud services.

Top ETFs for the week

The following ETFs themes worked well: banks, China Internet, healthcare providers, silver, and data centers. The top ETFs for the week include:

• iShares U.S. Regional Banks ETF (IAT) +5.1%
• KraneShares CSI China Internet ETF (KWEB) +4.7%
• iShares U.S. Healthcare Providers ETF (IHF) +4.7%
• iShares Silver Trust (SLV) +4.4%
• Pacer Benchmark Data & Infrastructure Real Estate ETF (SRVR) +4.0%

Top Fidelity Fund for the week

• Fidelity Select Health Care Services (FSHCX) +4.7%

Looking ahead to the week of October 25

Mega-cap technology companies are among the 150-plus S&P 500 companies reporting earnings this week. The Commerce Department releases its preliminary estimate on third-quarter GDP growth. The economic calendar also includes data on the Federal Reserve’s preferred inflation measure.

* Alphabet, Amazon, Apple, Facebook, and Microsoft, collectively accounting for over 22% of the S&P 500 market capitalization, report third-quarter earnings next week amidst a few misses in the technology sector. Last week, Intel, International Business Machines, and Snap shares declined sharply after posting disappointing results. Investors now seek insights into the impact of supply chain issues such as semiconductor chip & component shortages on the holiday shopping season when Apple and Amazon report. Likewise, investors await comments from Alphabet and Facebook on Internet advertising in the context of Apple increasing user privacy this year and companies reducing advertising spending due to labor shortages and supply chain disruptions.

* The Commerce Department reports its first estimate for third-quarter gross domestic product growth. Economists expect GDP to grow at an annualized rate of 2.8% in the third quarter, down from 6.7% in the second.

* The Commerce Department’s Bureau of Economic Analysis reports the personal consumption expenditures index, the Federal Reserve’s preferred inflation measure, for September. Economists forecast the PCE to rise 0.3% in September, down a tad from 0.4% in August.
 

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The nation’s top banks kicked off the third-quarter earnings season with robust reports. The reports boosted investors’ confidence in the U. S. economy. Economic data suggested the inflation rate may be peaking, soothing fears of higher interest rates. The gain in retail sales in September exceeded expectations, boosting confidence in the health of the consumer.

The third-quarter earnings reporting season kicked off last week, with leading banks painting a healthy picture of the U. S. economy and the consumer. Bank of America, Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley, and Wells Fargo reported stellar results.

Economic data raised hopes that the rate of inflation could be peaking. Supporting this optimism, the producer price index (a measure of wholesale prices) gained less than economists’ forecast while the consumer price index (a measure of retail prices) topped the forecast.

Retail sales data raised optimism about the state of the economy. The Commerce Department reported retail sales excluding auto sales rose 0.8%, exceeding economists’ 0.5% forecast. Although retail sales advanced partly due to higher prices, investors saw the data as evidence for the consumer’s inclination to spend.

For the week ending October 15, the S&P 500 (SPY) rose 1.8%. Ten of the 11 sectors gained.

Leaders and laggards for the week ending October 15, 2021.

Materials (XLB), real estate (XLRE), and consumer discretionary (XLY) outperformed the S&P 500, gaining 3.5% or more.

Communication service (XLC), health care (XLV), and consumer staples (XLP) lagged the benchmark.

Market breadth was positive. The number of advancing stocks in the S&P 500 led the number of decliners by a 3-to-1 ratio.

The S&P 500’s top 10 winners included consumer discretionary, energy, financials, industrial, information technology and materials companies.

1. Materials

Freeport-McMoRan (FCX) +13% – The largest U. S.-based copper producer was the top performer in the S&P 500 for the week. The price of copper surged 11% last week after inventories not earmarked for deliveries dropped on the London Metal Exchange to their lowest since 1974.

2. Industrial

J. B. Hunt (JBHT) +12% – The trucking company reported stellar third-quarter results, topping analysts’ sales and EPS forecasts by 27% and 25%, respectively.

3. Information Technology

Enphase Energy (ENPH) +12% – The energy technology company rallied with the alternative energy group on headlines of energy crises impacting many locations due to rising oil and natural gas prices.

4. Energy

Halliburton (HAL) +9% – Piper Sandler raised the price target on shares of the energy services company along with those of its peer Schlumberger. Halliburton reports quarterly earnings on Tuesday.

5. Consumer Discretionary

VF Corp. (VFC) +8% – Ahead of the apparel brand announcing quarterly earnings next Friday, Goldman Sachs and Wells Fargo raised their VF Corp. share price targets. VF shares also benefited from broad strength in consumer discretionary stocks.

Other Top 10 Winners

The S&P 500’s top 10 winners for the week included:

• Power generation equipment maker Generac Holdings (GNRC) +11%
• Gases and specialty chemicals producer Air Products and Chemicals (APD) +10%
• Casino & resort operator MGM Resorts International (MGM) +8%
• Oil & gas producer APA Corp. (APA) +8%
• Asset manager BlackRock (BLK) +7%

Top ETFs for the week

The following ETFs themes worked well: metals including uranium, copper, and rare earth, solar and clean energy. The top ETFs for the week include:

• North Shore Global Uranium Mining ETF (URNM) +19.3%
• Global X Copper Miners ETF (COPX) +12.3%
• Invesco Solar ETF (TAN) +11.0%
• VanEck Rare Earth/Strategic Metals ETF (REMX) +10.3%
• iShares Global Clean Energy ETF (ICLN) +7.5%

Top Fidelity Fund for the week

• Fidelity Select Gold (FSAGX) +6.1%

Looking ahead to the week of October 18

The third-quarter earnings reporting season continues into its second week. The Fed’s beige book and housing industry data will be in focus this week. The first cryptocurrency ETF could debut as well.

* The third-quarter earnings reporting season broadens beyond the financial sector. Honeywell Intl., Intel, Johnson & Johnson, Netflix, NextEra Energy, Procter & Gamble, and Tesla are among the S&P 500 members reporting this week. The commentaries from these companies on inventories, backlog, and delivery times should give investors a better perspective on how companies are managing component shortages and rising input costs.

* On Wednesday, the Federal Reserve releases its beige book with insights on current economic conditions ahead of the November 2-3 Federal Open Market Committee meeting on interest rate policy.

* The economic calendar focuses on the housing industry. Data on housing starts and building permits come out on Tuesday, followed by data on existing home sales on Thursday.

* The much-awaited first cryptocurrency ETF could debut this week. The ProShares Bitcoin Strategy ETF investing in bitcoin futures could begin to trade next week if the Securities and Exchange Commission gives the green light.
 

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Stocks managed to overcome a disappointing September jobs report and advance last week. The Senate approved a bill to increase the nation’s borrowing limit by $480 billion, effectively funding the U. S. government through early December.

The U. S. Labor Department reported the economy added 194,000 jobs in September. Economists surveyed by Dow Jones forecasted 500,000 in job creation.

The unemployment rate, however, fell more sharply than economists expected to 4.8%. Wages increased 4.6% on an annual basis.

Although job creation disappointed, investors believed wage increase and the unemployment rate in September would keep the Federal Reserve on track to reduce stimulus in the coming months. The yield on the 10-year Treasury note ticked higher.

The U. S. Senate approved a bill to increase the U. S. borrowing limit by $480 billion after 11 Republicans joined 50 Democrats in voting to end the debate. The nation’s debt can now rise to about $28.8 trillion from $28.4 trillion, allowing the Treasury Department to pay bills until December 3. The bill now moves to the House for Congressional approval, expected before Tuesday.

For the week ending October 8, the S&P 500 (SPY) rose 0.8%. Eight of the 11 sectors gained.

Leaders and laggards for the week ending October 08, 2021.

Energy (XLE), financials (XLF), and industrials (XLI) outperformed the S&P 500, gaining 1.8% or more.

Real estate (XLRE), communication service (XLC), and health care (XLV) lagged the benchmark.

Market breadth was positive. The number of advancing stocks in the S&P 500 led the number of decliners by a 9-to-5 ratio.

The S&P 500’s top 10 winners included communication service, consumer discretionary, energy, financials, and industrial companies.

1. Energy

Energy stocks accounted for six of the top 10 winners. They rallied as oil & natural gas prices soared to multi-year highs. Petroleum prices rallied after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, stuck to their current production plans. Oil rose 4.6% last week to close just shy of the $80 a barrel last seen in 2014. Natural gas prices pulled back after climbing to their highest level since 2008.

Phillips 66 (PSX) gained 13% to be the top performer in the S&P 500 for the week after the company increased its quarterly dividend payment and reduced borrowings by $500 million.

Oil & gas producers APA Corp. (APA), Diamondback Energy (FANG), Hess Corp. (HES), Marathon Oil (MRO), and Pioneer Natural Resources (PXD) gained between 10% and 13%, each.

2. Financials

Intercontinental Exchange (ICE) +11% – The exchange operator reported an 18% increase in the third quarter average daily volume from higher volumes in Commodities and Financials. Comments from JPMorgan on the likelihood of ICE resuming share buybacks added to bullishness.

3. Consumer Discretionary

General Motors (GM) +10% – The automaker shared its goal to double sales by 2030, including several new electric vehicle models. General Motors believes this transition could expand its profit margin to 12-14% from 7.9% last year. The company plans to debut an all-electric Silverado pickup truck in January 2022.

Other Top 10 Winners

The S&P 500’s top 10 winners for the week included:

• Gaming software maker Take-Two Interactive (TTWO) +10%
• Railroad Norfolk Southern (NSC) +9%

Top ETFs for the week

The following ETFs themes worked well: China Internet, gold miners, Russia, platinum, and energy. The top ETFs for the week include:

• KraneShares CSI China Internet ETF (KWEB) +8.2%
• VanEck Junior Gold Miners ETF (GDXJ) +6.3%
• VanEck Russia ETF (RSX) +5.2%
• Aberdeen Standard Physical Platinum Shares ETF (PPLT) +5.1%
• Energy Select Sector SPDR Fund (XLE) +5.1%

Top Fidelity Fund for the week

• Fidelity Select Natural Gas (FSNGX) +5.8%

Looking ahead to the week of October 11

This week is about earnings and inflation. The third-quarter earnings reporting season kicks off this week. Investors will focus on what companies have to say about supply chain disruptions and surging oil prices. Consumer and producer price data are in store as well this week.

* The top banks start the third-quarter earnings reporting season this week. Reporting banks include JPMorgan Chase, Bank of America, Morgan Stanley, Citigroup, and Goldman Sachs. According to FactSet, analysts expect S&P 500 company aggregate earnings to grow 27.6% year-over-year. Although a far cry from the 90.9% growth in earnings recorded in the second quarter, the third quarter could mark the third-fastest growth rate since 2010.

* Investors will likely pay attention to what companies have to say about the impact of supply chain disruptions and rising energy prices on profits. Oil price is up more than 27% since August 20 and is driving inflation. Transportation and consumer discretionary companies could be at risk of falling short of their EPS forecasts.

* The economic calendar includes data on inflation in consumer and producer prices. Briefing.com shows economists expect consumer and producer prices to increase 0.3% and 0.5%, respectively, in September. Investors will also sense how inflation is impacting consumer spending when the Commerce Department reports September retail sales. Economists expect retail sales to fall 0.5%.

* Although a truce between Senate Democrats and Republicans helped avoid a debt default, the debt ceiling is likely to get investors’ attention. Senate Minority leader McConnell threatens to withdraw his assistance when the debt ceiling topic comes into focus again in early December.
 

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There was little incentive for buyers to step in and prop up stock prices last week. Investors worried about the possibility of higher corporate tax rates crimping profits. Retail sales muddied an otherwise consistent picture of the economy losing momentum. The decline in stocks pushed the S&P 500 to its 50-day moving average, with the FOMC scheduled to meet this week and the trading calendar embarking on a seasonally weak period.

Congress returned to Washington after recess. House Democrats proposed higher taxes on corporations and wealthy Americans to fund President Biden’s $3.5 trillion budget package. The proposal raises the corporate tax rate to 26.5% from 21.0%.

In economic data, retail sales were an outlier, with other data pointing to slowing economic growth. The Census Bureau reported August retail sales rose 0.7% compared to economists’ forecast for a 0.8% decline.

Initial claims for unemployment benefit claims of 332,000 exceeded economists’ forecasts by 12,000. The University of Michigan’s consumer sentiment measure clocked just 71, continuing to hover near a 10- year low.

The news on the inflation front was somewhat calming. The consumer price index rose 0.3% in August. Economists surveyed by Dow Jones expected the CPI to increase by 0.4%. The annual increase in the CPI stood at 5.3% in August, keeping inflation at the highest level in about 13 years.

For the week ending September 17, the S&P 500 (SPY) fell 0.9%. Only two of the 11 sectors gained.

Leaders and laggards for the week ending September 17, 2021.

Energy (XLE), consumer discretionary (XLY), and financials (XLF) outperformed the S&P 500.

Real estate (XLRE), materials (XLB), and utilities (XLU) lagged the benchmark.

Market breadth was negative. The number of declining stocks in the S&P 500 led the number of advancers by a 3-to-2 ratio.

The S&P 500’s top 10 winners included communication service, consumer discretionary, energy, financial, health care, and materials companies.

1. Energy

Oil & gas producers fared well. The price of oil rose 3.2% for the week to close above $70 a barrel. The U.S. Energy Information Administration said U. S. crude oil stockpiles fell to the lowest level since September 2019 as hurricanes Nicholas and Ida reduced offshore production by 26 million barrels. Prospects of U. S. oil demand increasing with the decline in new COVID cases and OPEC’s forecast for oil demand to exceed pre-pandemic levels next year supported the advance.

EOG Resources (EOG) gained 11% to be the top performer in the S&P 500 for the week. Tudor Pickering upgraded the oil & gas producer to Buy from Hold, setting an $82 price target.

Diamondback Energy (FANG) rose 10% after announcing a $2 billion stock buyback as part of its plan to return 50% of free cash flow to shareholders in the fourth quarter.

Occidental Petroleum (OXY) and APA Corp. (APA) were the two other oil & gas producers among the top 10 winners. They gained 8% each.

2. Health Care

Centene Corp. (CNC) +8% – The health care provider gained on unsubstantiated merger talk and general strength among health care provider peers. Mizuho and Morgan Stanley brokerages raised their price targets on Centene.

Incyte Corp. (INCY) +7% – The biotech company received conditional approval for pemigatinib in treating bile duct cancer. Incyte also announced it would present trial data for its cream in treating vitiligo and atopic dermatitis at the European Academy of Dermatology and Venereology.

3. Materials

CF Industries (CF) +8% – The fertilizer producer gained after Bank of America reiterated its Buy recommendation and raised the CF share price target to $67, implying over 40% upside. Bank of America attributed the higher price target partly to the possibility of China banning fertilizer exports.

Other Top 10 Winners

The S&P 500’s top 10 winners for the week included:

• Telecom service provider Lumen Technologies (LUMN) +8%
• Auto manufacturer Ford Motor Co.(F) +7%
• Asset Manager Invesco Ltd. (IVZ) +7%

Top ETFs for the week

The following ETFs themes worked well: oil & gas, cannabis, airlines, solar energy, and health care providers. The top ETFs for the week include:

• SPDR S&P Oil & Gas Exploration & Production ETF (XOP) +5.1%
• AdvisorShares Pure US Cannabis ETF (MSOS) +4.3%
• U.S. Global Jets ETF (JETS) +2.4%
• Invesco Solar ETF (TAN) +2.3%
• iShares U.S. Healthcare Providers ETF (IHF) +2.3%

Top Fidelity Fund for the week

• Fidelity Select Natural Gas (FSNGX) +3.4%

Looking ahead to the week of September 20

The S&P 500 starts off the seasonally unfavorable period, perched at its 50-day moving average. The Federal Reserve’s interest rate policy meeting is the main event of the week. Congress continues to work on the budget. Investors are looking to earnings reports from global companies like FedEx and Nike to get a handle on supply chain bottlenecks and inflation.

* Stocks have declined in the closing days of September in many years. The S&P 500 starts the trading week just four points below its 50-day moving average. Stocks have held support at the 50-day moving average on nine occasions in 2021, including early March. In early March, the benchmark managed to regain its footing in a matter of days after breaking support at the 50-day moving average. How stocks fare this week depends on what the Federal Open Market Committee and Congress do or do not.
 

Stocks have held support at the 50-day moving average nine times so far in 2021.

* The Federal Open Market Committee begins its interest rate policy meeting on Tuesday. In light of recent data, economists expect the Fed to defer the announcement on tapering bond purchases to November after discussing the topic at the September meeting. The Fed’s new economic projections and interest rate forecast, i.e., the dot plot, released on Wednesday, can influence financial markets even if the comments on tapering do not. Stock and bond prices could react negatively if the dot plot shows interest rates rising sooner than previously forecasted.

* Congress continues work on the $3.5 trillion budget including infrastructure spending. As such, the proposal for higher taxes will remain in focus and can become worrisome. Calls to raise the debt ceiling are also likely to become louder in a bid to allow the Treasury to issue more debt.

* Accenture, Adobe, Costco, FedEx, and Nike are among the S&P 500 index members reporting earnings this week. With COVID continuing to disrupt supply chains and the resulting part shortages leading to inflation, investors will look to comments from freight & logistics provider FedEx and global footwear & accessories brand Nike to understand the status of supply chain bottlenecks. Earnings reports from Accenture and Adobe can provide investors insights on trends impacting the information technology industry.

* A relatively light economic calendar puts the spotlight on the housing industry. Housing starts, building permits, and sales of existing and new homes are due this week.
 

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Concerns of the economy losing steam, triggered by the August jobs data on September 3, spilled over to the trading week shortened by the Labor Day holiday. Inflation worries escalated after the producer price index showed a record high annual increase of 8.3% in August. Investors worried the Federal Reserve could decide to scale back stimulus due to inflation concerns just when the economy shows signs of losing vigor.

The U. S. Producer Price Index (PPI) rose 0.7% in August, exceeding the 0.6% forecast of economists surveyed by Dow Jones. The 8.3% increase in the PPI for the 12 months ending in August is the highest rise since the collection of the PPI data began in November 2010.

Investors weighed the increase in the PPI against the backdrop of the weak August jobs data reported on September 3. They worried about the economic recovery losing steam just when the Federal Reserve contemplates scaling back monetary measures used to limit the damage to the economy from the pandemic.

In other developments, the European Central Bank said it would slow down the pace of its bond purchases, elaborating that it can maintain favorable financing conditions with a moderately lower rate of asset purchases than in the previous two quarters.

President Biden stiffened his stance on COVID vaccinations, mandating them for federal employees & contractors. Biden also asked the Labor Department to require all employers with more than 99 employees to either mandate vaccinations or require weekly testing.

For the week ending September 10, the S&P 500 (SPY) fell 1.7%. All of the 11 sectors declined.

Leaders and laggards for the week ending September 10, 2021.

Consumer discretionary (XLY), financials (XLF), and consumer staples (XLP) held up better than the S&P 500, losing 1.3% or less.

Real estate (XLRE), health care (XLV), and industrials (XLI) lagged the S&P 500.

Market breadth was negative. The number of declining stocks in the S&P 500 led the number of advancers by a 5-to-1 ratio.

The S&P 500’s top 10 winners included consumer discretionary, energy, financial, health care, and information technology companies.

1. Health Care

Moderna (MRNA) +13% – The biotechnology company rose 13% to claim honors as the week’s top performer in the S&P 500. The COVID vaccine developer provided its annual research and development update. Moderna said it is developing a single-dose vaccine that includes boosters against both COVID and seasonal flu. Moderna also disclosed a robust drug pipeline, with 37 programs in development, including 22 in clinical trials.

Perrigo (PRGO) +6% – The maker of consumer self-care products announced it is buying HRA Pharma for $2 billion. The purchase adds blister care, women’s health, and scar care products to Perrigo’s portfolio. On September 20, Perrigo will be removed from the S&P 500 index and included in the S&P MidCap 400 index.

2. Consumer discretionary

CarMax (KMX) + 6% – The user-car retailer rallied on news of automobile inventories falling to an all-time low of 136,700 units. Automakers have curtailed production due to the shortage of semiconductor chips.

3. Energy

Cabot Oil & Gas (COG) +6% – The natural gas producer rose 6%, riding the coattails of the commodity. The price of natural gas rose 5% last week. Cabot Oil & Gas featured in this column as the week’s top performer in the S&P 500 for the week ending September 3.

4. Information Technology

Global Payments (GPN) +5% – The payment processing and software solutions provider agreed to buy MineralTree for $500 million. MineralTree provides accounts payable automation and business-to-business payments solutions.

Other Top 10 Winners

The S&P 500’s top 10 winners for the week included:

• Construction & farm equipment retailer Tractor Supply Company (TSCO) +5%
• Semiconductor manufacturer Analog Devices (ADI) +5%
• Silicon Valley Bank and SVB Leerink parent SVB Financial Group (SIVB) +4%
• Semiconductor capital equipment maker KLA Corp. (KLAC) +4%
• Remote-working software provider Citrix Systems (CTXS) +4%

Top ETFs for the week

The following ETFs themes worked well: uranium, volatility, lithium, China, and rare earths. The top ETFs for the week include:

• Global X Uranium ETF (URA) +10.1%
• iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) +8.5%
• Global X Lithium & Battery Tech ETF (LIT) +3.3%
• Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) +3.1%
• VanEck Rare Earth/Strategic Metals ETF (REMX) +2.9%

Top Fidelity Fund for the week

• Fidelity Japan (FJPNX) +1.8%

Looking ahead to the week of September 13

Threats persist for last week’s decline to continue. This week is all about inflation at the consumer level. With the FOMC meeting just a week away, a higher than expected increase in the CPI could tip the Fed to announce its plan to taper bond purchases after meeting on September 21-22. Congress embarks on a busy legislative schedule.

* The economic calendar this week includes data on consumer price inflation (CPI) and retail sales. Briefing.com shows economists expect the CPI to rise 0.4% month-over-month in August, a tad lower than 0.5% in July. Economists project retail sales to decline 0.7% in August after falling 1.1% in July. These data points take on added importance as they are the last signposts on the economy before the September 21-22 Federal Open Market Committee meeting on interest rate policy. Data suggesting higher inflation, or to a lesser extent, robust growth may tip the Fed to bring forward the timetable for tapering monthly bond purchases.

* Congress has a busy schedule. Lawmakers need to act soon to avert a government shutdown. Democrats also have their task cut out in delivering the infrastructure and social spending package. The U. S. Senate reconvenes on Monday, September 13, after a five-week break. Politics will resume influencing stocks starting this week.

* Enterprise software company Oracle is the only S&P 500 member reporting earnings this week.
 

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With the delta variant impacting hiring, the U. S. economy added nearly 500,000 fewer jobs in August than economists predicted. U. S. stocks, however, had no trouble extending the rally from the previous week. Economists reasoned the Federal Reserve would not proceed forward with the announcement to taper bond purchases in September in light of the weak August jobs data.

The Labor Department reported the U. S. economy added just 235,000 jobs in August, far fewer than 1.05 million added in July. Economists surveyed by Dow Jones forecasted 720,000 job additions in August. The unemployment rate, however, dropped from 5.4% to 5.2%, a new pandemic low.

The rise in COVID cases from the coronavirus delta variant adversely impacted hiring in the hospitality, leisure, and retail industries.

The jobs report, however, stoked inflation concerns. Average hourly earnings rose 0.6% month-over-month to show a 4.3% increase on a year-over-year basis.

In other data, the Institute for Supply Management reported a decline in its services activity index to 61.7 in August from a record 64.1 in July.

The resurgence in COVID cases prompted the European Union to recommended member countries ban non-essential travel to the U. S.

Inflation and the resurgence in COVID cases took a toll on consumer confidence. The Conference Board’s consumer confidence index slid to a six-month low in August.

U. S. stocks extended their rally from the previous week, setting a few new record highs. Investors saw the subpar August jobs data causing the Federal Reserve to delay the announcement on tapering bond purchases to November.

For the week ending September 3, the S&P 500 (SPY) rose 0.6%. Seven of the 11 sectors gained.

Leaders and laggards for the week ending September 03, 2021.

Real estate (XLRE), health care (XLV), and consumer staples (XLP) led the benchmark gaining 1.5% or more.

Financials (XLF), energy (XLE), and materials (XLB) lagged the S&P 500.

Market breadth was positive. The number of advancing stocks in the S&P 500 led the number of decliners by a 9-to-8 ratio.

The S&P 500’s top 10 winners included companies from the energy, industrial, health care, and real estate sectors, with health care and real estate companies accounting for seven of them. ServiceNow (NOW) from the information technology sector rounded out the top 10 list.

1. Energy

Cabot Oil & Gas (COG) +14% – The natural gas producer rose 14% to claim honors as the week’s top performer in the S&P 500. Natural gas soared 7% after inventories rose less than expected, amidst expectations for supplies to remain impacted in hurricane Ida’s aftermath.

2. Industrial

Quanta Services (PWR) +12% – The contract services company announced it is buying privately-held energy contractor Blattner Holding Co. The $3 billion purchase gives Quanta access to Blattner’s prowess in renewable energy.

3. Health Care

Baxter International (BAX) +12% – Health care equipment & supplies firm Baxter International said it would buy Hill-Rom Holdings (HRC) for about $11 billion. The purchase would help Baxter add smart hospital beds to its portfolio of patient monitoring and diagnostic products.

Moderna (MRNA) +9% – The biotechnology company filed initial data on its COVID vaccine booster with the U. S. Food and Drug Administration, seeking regulatory approval. Moderna said it also plans to seek regulatory okay for its COVID vaccine booster from the European Medicines Agency.

Catalent (CTLT) +8% – The contract drug maker company beat analysts’ fourth-quarter sales and EPS forecasts by 4% and 5%, respectively. Catalent also said it is buying a gummy nutritional supplements maker, Bettera, for $1 billion to expand into the supplements market.

4. Real Estate

Datacenter REITs, Equinix (EQIX) and Iron Mountain (IRM), and logistics & warehousing REITs, Duke (DRE) and Prologis (PLD), gained 6-7% each.

REITs benefited from investor’s preference for defensive groups amidst the uncertainty of the Fed tapering monthly bond purchases. The yield on the 10-year Treasury Note was range-bound, supporting REIT prices. Barclays initiated coverage of Duke and Prologis, rating them overweight. Equinix purchased two data centers in India.

Top ETFs for the week

The following ETFs themes worked well: uranium, Chinese Internet, blockchain, Japan, and data & infrastructure REITs. The top ETFs for the week include:

• Global X Uranium ETF (URA) +20.7%
• KraneShares CSI China Internet ETF (KWEB) +9.0%
• Amplify Transformational Data Sharing ETF (BLOK) +6.3%
• iShares MSCI Japan ETF (EWJ) +5.4%
• Pacer Benchmark Data & Infra. Real Estate ETF (SRVR) +5.1%

Top Fidelity Fund for the week

• Fidelity Japan Fund (FJPNX) +5.5%

Looking ahead to the week of September 06

In recent years, stocks have often traded down during the week of the Labor Day holiday. Investors’ attention will be on economic data relating to jobs and inflation during this four-day trading week.

* The week marks the end of summer with traders returning from vacation. In four of the past five years, stocks have lost ground during this short trading week.

* Federal Reserve Chairman Powell has stated that the central bank would use employment as a primary metric to consider the end of its pandemic-era measures to add liquidity to markets. Investors believe the Fed would push the announcement on tapering bond purchases to November instead of announcing after the September FOMC meeting in light of the below-par August jobs report. Investors will look for consistency with the above picture when initial weekly jobless claims and the job openings report come out this week. Briefing.com reports economists’ forecast initial weekly jobless claims of 345,000, essentially unchanged from 340,000 last week.

* The Fed is focusing on jobs rather than inflation, believing the uptick in the latter to be temporary. Investors will seek validation in producer price data after the August job data showed a relatively robust increase in hourly wages. Briefing.com reports economists’ forecast producer prices to rise 0.6% in August compared to 1.0% in July.

* Wall Street will also look for clues on Federal Reserve policy when New York Federal Reserve President Williams speaks on the economic outlook at an online event hosted by St. Lawrence University on Wednesday.
 

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