Schwab Market Update
U.S. stocks overcame early pressure but finished mixed as the bulls and bears appeared to continue to lack much conviction. The major indexes are on pace for weekly gains despite lingering uncertainties regarding the Delta variant, global monetary policy, fiscal stimulus, and persistent supply chain disruptions. However, September seems to be living up to its historically sluggish reputation as the underlying market action of the indexes remained choppy. The economic calendar was highlighted by an unexpected gain in August retail sales, though the prior month's figures were revised to larger drawdowns than initially reported, while Philadelphia manufacturing output surprisingly jumped. Equity news remained relatively light, but Texas Instruments raised its dividend and Electronic Arts delayed the launch of its Battlefield 2042 game. Treasuries were lower to lift yields, and the U.S. dollar gained ground. Crude oil prices paused after yesterday's rally and gold fell. Europe rose as the Industrials and Financials sectors led the charge, while Asia finished mixed with the intensified regulatory crackdown in China weighing on Chinese and Hong Kong markets.
Last week, the S&P 500 was trading at an all-time high, but the underlying deterioration in breadth and non-confirmations by other indexes bears watching.
Despite recent bouts of sector leadership rotation, we don’t expect defensive sector outperformance to last.
The U.S. economy appears to be shifting from recovery mode to a new, more-mature expansion phase.
Peak growth rates for the economy and earnings are likely behind us, setting the economy up for a boom-settle scenario in the second half of the year.
Trendy and speculative trades have gained micro bubble status and rolled over of late, but their weakness hasn’t infected the broader market.
Investor attention has shifted from Growth to Value as the economy regains its footing, but understanding their factors and fundamentals is crucial.