Weekly Recap

by Michael Reinking, Sr. Market Strategist
September 17, 2021 5:00 PM ET
DOW 34,585 (-166), S&P 500 4,433 (-41), Russell 2000 2,237 (+4), NYSE FANG+ 7,264 (-35), ICE Brent Crude $75.40 /barrel (+$1.99), Gold $1,754/oz (-3), Bitcoin ~46.9k (-500)

MAC Desk Commentary:
The tone this week was decisively negative. The mounting concerns across a litany of issues is clearly weighing on investor sentiment and has many nervous that the elusive 5% pullback could be upon us. However, despite this narrative, major indices remain resilient and have been able to stave off significant declines. As has been discussed, today was quad-witch expiration and the S&P quarterly rebalances. As expected, volumes surged into the close with over 2.3B shares trading in the closing auction making it the second largest closing auction in history. The S&P 500 ended today down ~1% (-0.6% WTD) but it is only 2.6% below its all-time high. For the fifth consecutive month the index tested its 50d moving average (~4,435) during the week of options expiration. This technical level has served as support throughout the rally, so we’ll need to see if the buy the dip crowd emerges next week. The week after September expiration has historically been weak, closing lower in 8 of the last 9 years. The Dow Jones Industrial Average and the R2k fared slightly better this week. The Dow was only off 0.1% and with a late day rally the Russell 2k closed out the week up 0.4%. As we’ve been pointing out recently, with the lack of news flow, technicals have been playing a larger part of the day-to-day volatility
Energy prices have continued surge amidst supply issues with ICE Brent ending the week up over 3%, around the highs for the year. Natural gas prices may have peaked in the near-term finishing the week up ~2%, but that was >10% off of the highs of the week. Energy stocks were the best performing sector in the market up over 3%. Material stocks were on the opposite end of the spectrum closing down >3%. Over the last two days the US dollar index has moved higher which has put pressure on the metals complex. Treasury yields are retesting the high end of the recent range ahead of next week’s Fed meeting.
Much of the angst this week has come out of China. There was another round of weak economic data (retail sales and industrial production) and with mitigation measures being reinstituted there is no sign that we are nearing a turning point. The regulatory crackdown also shows no signs of abating as Macau casino operators were the most recent companies to come under pressure. US/China relations seem to remain strained as President Xi reportedly rebuffed a face-to-face meeting with President Biden. The last cause of concern comes from Evergrande, a commercial developer, that has been facing liquidity issues. Next week there is speculation the company could miss a bond payment which is fueling concern of contagion within the system if a restructuring cannot be worked out. This situation has been ongoing for some time now, but it does seem to be coming to a head.
I would describe the news flow out of the US more as absent as opposed to negative. There has not been any progress in Washington as the debt ceiling looms and the Democratic party is still divided. This on balance lowers the risk associated with some of the worst-case tax increase outcomes but there is still headline risk. I’d highlight that the pace of negative pre-preannouncements did not accelerate this week despite multiple investors conferences. Growth concerns remain but on balance the economic data in the US this week was positive. The regional surveys which provide the first look at September data both exceeded expectations and there was a sharp rebound in August retail sales data. CPI came in below expectations feeding some of the “transitory” narrative but any optimism on that front has been offset by the pickup in inflation expectations. Which leads us to the Fed….
What’s on Tap Next Week
Clearly the FOMC policy decision is the biggest event next week but there are multiple central banks on the clock including the BOJ and the PBOC. The Fed has been preparing investors for a taper announcement for months now. We’ll likely get an update on that front with most expecting the official announcement in November. This month the Summary of Economic Projections will be released so we will get to play that fun Fed game of connect the DOTS. China will be closed Monday and Tuesday but will remain in focus with the PBOC decision on Wednesday. The Evergrande interest payment is due on Thursday. That is also when are US/Eurozone flash Markit PMIs will be released. Fedex and Nike will both be reporting results and given their global reach this too will be closely watched for clues about Q3 earnings season which will get underway in a few weeks. Have a great weekend! 
Index Today WTD YTD
S&P 500 -0.9% -0.6% 18.0%
Dow -0.5% -0.1% 13.0%
Russell 2K 0.2% 0.4% 13.3%
Sorted by WTD performance
Sectors Today WTD YTD
S&P 500 / Energy -SEC -0.76% 3.31% 29.04%
S&P 500 / Consumer Discretionary -SEC -0.38% 0.54% 12.83%
S&P 500 / Financials -SEC -0.49% -0.09% 26.96%
S&P 500 / Health Care -SEC 0.07% -0.22% 16.75%
S&P 500 / Real Estate - SEC -0.95% -0.25% 28.04%
S&P 500 / Information Technology -SEC -1.52% -0.68% 19.05%
S&P 500 / Consumer Staples -SEC -0.53% -0.89% 6.01%
S&P 500 / Communication Services -SEC -1.27% -1.24% 26.09%
S&P 500 / Industrials -SEC -1.05% -1.56% 12.90%
S&P 500 / Utilities -SEC -1.59% -3.11% 5.03%
S&P 500 / Materials -SEC -2.06% -3.22% 11.63%
AVERAGE -0.95% -0.67% 17.66%
Catalysts for Next Week:
  • Monday -
    • China/Japan closed
    • Earnings Pre-Market: None
    • Economic data:
      • US: NAHB Housing Market Index
      • Global: Hong Kong CPI, Germany PPI
    • Central Banks
      • ECB PEPP data
    • USDA crop report
    • Earnings Post-Market:  LEN
  • Tuesday -
    • China closed
    • Earnings Pre-Market: APOG, AZO, CBRL, NEOG
    • Economic data:
      • US - Housing starts, Building permits
      • Global: Japan industrial production/capacity utilization
    • Central Banks
      • RBA Minutes
    • $24B 20yr Auction, German 7yr auction
    • Energy: API inventory
    • President Biden to address UN
    • Earnings Post-Market: ADBE, FDX, INVN, SFIX
  • Wednesday -
    • Hong Kong closed
    • Earnings: None
    • Economic data:
      • US - Mortgage apps, Existing home sales
      • Global: ECB Consumer Confidence
    • Central Banks
      • PBOC, BOJ, Brazil and FOMC Policy Decisions
    • $26B 2yr Auction, Germany 15yr auction
    • Energy - EIA inventory
    • Earnings Post-Market: FUL, KBH, SCS
  • Thursday
    • Japan closed
    • Earnings Pre-Market: ‘ACN, DRI, RAD
    • Economic data:
      • US - Claims, Flash Markit PMI, Chicago/KC Fed Index, Leading Indicators
      • Global: Eurozone Flash Markit PMI
    • Central Banks
      • BOE Rate Decision
    • $14B 10yr TIPS Auction
    • Evergrande interest payment due
    • Energy - Nat Gas Inventory Data
    • Earnings Post-Market: AIR, CAMP, COST, MTN, NKE, PRGS, TCOM
  • Friday
    • Earnings Pre-Market: None
    • Economic data:
      • US - New home sales
      • Global: Korea PPI, Japan CPI/Markit PMI, Germany Ifo Business Survey
    • Central Banks
      • Fed Listens (Powell, Clarida and Bowman)
      • Fed Speakers - George
    • Energy - Rig Count
    • Earnings Post-Market: None
  • Sunday - German elections
Market stat time…Volume was above average.  Breadth was mixed across the board. Advancing issue: 1192 / Declining issues 2085: - for a ratio of 0.6 to 1.  New 52-Week Highs: 78 / New 52-Week Lows: 32.  Send us a note here!
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