Week of October 11, 2021

Last week, the Dow gained 1.2% for its best week since June 25.  The S&P 500 also ended the week higher as stocks reversed earlier losses after Senate Republican and Democrats agreed to a short-term increase in the debt ceiling.  After a 4.8% loss in September, the S&P 500 is now up about 2% for the month of October and about 3% from its closing record.

Stocks managed to post gains for the week despite a poor jobs report on Friday.  The Labor Department reported Friday that the economy added just 194,000 jobs in September compared to the Dow Jones estimate of 500,000.  “The three-month moving average on nonfarm payrolls is a solid 550,000,” Joe LaVorgna, chief Americas economist at Natixis CIB, said in a note.  “At the pace, employment will recoup its pandemic-related losses by next July.  The recovery in the jobs market has progressed enough that the Fed will initiate tapering next month with targeted completion around next June.”

Citing the expiration of fiscal support from Congress and slower-than-expected recovery in consumer spending, Goldman Sachs lowered its 2022 growth estimate from 4.4% to 4% and took its 2021 estimate down a tick from 5.7% to 5.6%.

Investor attention remans focused on recent issues, such as supply-chain pressures on company profits, a global energy crunch, inflation, and the future of monetary stimulus from the Federal Reserve.  “The week ahead will center around the U.S. CPI release on Wednesday but it might be a touch backward looking given that energy has spiked more recently and that used car prices are again on the march after a late summer fall that will likely be captured in this week’s release,” said Jim Reid, a strategist at Deutsche Bank.