September 10, 2023
Volume 10, Issue 37
Stocks closed lower last week as some positive economic signals drove an increase in interest rates. Growth stocks fared better than value shares and large-caps outperformed small-caps by a wider margin. A decline in Apple, the most heavily weighted stock in the S&P 500, drove part of the declines after news that Chinese government employees would no longer be able to use iPhones. Traders were also discouraged by reports that the upcoming iPhone 15 will be significantly more expensive than current models. Declines in NVIDIA and other chipmakers also weighed on the market.
Last week’s economic calendar, while not especially heavy, seemed to drive sentiment by generally surprising on the upside. The standout appeared to be the Institute for Supply Management’s report on August services sector activity, which jumped unexpectedly to its highest level since February. The report indicated that new orders were growing at a faster pace, although order backlogs fell sharply, and inventories had risen considerably. Export orders also remained healthy, although worries grew during the week about a sharp slowdown in the Chinese economy.
Meanwhile, Thursday’s weekly jobless claims report came in lower than expected, indicating continued strength in labor demand despite August’s solid increase in the unemployment rate (from 3.5% to 3.8%). Defying expectations for a small increase, the number of Americans applying for unemployment in the previous week fell to 216,000, the lowest level in six months. Continuing claims fell to 1.68 million, the lowest level since mid-July.
The jobless numbers sparked a rise in short-term U.S. Treasury yields, with the yield on the two-year U.S. Treasury note briefly crossing back above the 5 percent threshold on Thursday afternoon.
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks.
Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In The News
Hiring and wage pressure might have eased, but jobless claims data suggest that layoffs in the U.S. remain exceptionally low. Worker filings for unemployment benefits fell to a seasonally adjusted 216,000 last week, the Labor Department announced the lowest level in almost seven months.
The first half U.S. gross domestic product was a hair over 2 percent. Inflation expectations are nearly back to 2 percent. Job growth over last year? Also, 2 percent.
The U.S. economy is looking so solid that Fed officials may need to double their 2023 growth view.
Something strange is happening with the federal budget this year. The deficit has exploded, more than doubling in the first 10 months of the fiscal year compared with the same period last year. The government is also bringing in less revenue this fiscal year – which ends September 30 – in part due to a slumping stock market that reduced revenue from capital gains taxes.
For most of the 20th century, stocks and bond yields moved in opposite directions. They’re doing it again after a two-decade break.
Charts of the Week
I found the following articles to be of note. Some may be of interest only to advisors, while others are aimed more broadly. You may hit paywalls below; most can be overcome here.
- Is a Wide Moat Better Than a Well-Managed Company? (Adam Fleck)
- Does #GirlMath Add Up? (Amy Arnott)
- The Real Yale Model (Ted Seides)
This is the best thing I read last week. The ugliest. The most troubling. The most worrying. The most incredible. The least surprising. The best story. The best interview. Good news/bad news. Yuck. Big, if true.
Warren Buffett, long-time Chairman of Berkshire Hathaway, who recently turned 93, holds one of the most unbelievable investment statistics in the world: Berkshire’s stock could decline 99 percent and still be outperforming the S&P 500 since inception.
“When you combine ignorance with leverage, you get some pretty interesting results.”
~ Warren Buffett
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor.
This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets.