Last Week in Review – September 16, 2022

September 19, 2022

Last Week In Review

Last week, stocks fell sharply as inflation fears intensified and short-term bond yields reached levels last seen in 2007. The S&P 500 Index recorded its most significant weekly drop since mid-June and hit its lowest point on an intraday basis since mid-July. Growth stocks fared worst, with the technology-heavy Nasdaq Composite falling nearly 5.5%. Communication services and information technology shares led the declines within the S&P 500 as Google parent Alphabet and Facebook parent Meta Platforms hit new 52-week lows. Industrials and materials shares were also fragile.

Selling was orderly, however, with the CBOE Volatility Index (VIX) remaining well below the levels seen at the start of the pandemic. Trading volumes were also contained, with the number of shares traded coming in below average for the year on Tuesday, when the S&P 500 suffered its worst drop in two years.

Despite the evidence of a resilient U.S. consumer, a gloomy outlook on the global economy from shipping giant FedEx sent stocks sharply lower at the end of the week. After the market closed on Thursday, FedEx announced that it was pulling its earnings guidance for the fiscal year 2023 due to “expectations for a continued volatile operating environment,” Its new CEO told a CNBC interviewer that he expected a global recession. FedEx stock fell by about 21% in trading on Friday.

US – Markets & Economy

Last week’s defining event appeared to be Tuesday’s consumer price index (CPI) report, which came in above expectations and dimmed hopes for some investors that the economy had moved beyond “peak inflation.” Headline prices rose 8.3% for the 12 months ended in August versus consensus expectations for an increase of around 8.1%. More concerning may have been that core inflation (excluding food and energy) jumped to 6.3%—its highest level since March and above expectations for a rise of 6.1%. A 0.7% housing cost increase in August was partly to blame, but rising food and medical care prices also contributed heavily. Core producer prices, reported Wednesday, offered a somewhat more hopeful story, continuing a year-on-year decline that began in April, falling to 7.3% in August from 7.6% in July.

The week brought mixed messages on wage inflation, which has been a primary concern of policymakers. Media reports said Goldman Sachs would soon cut jobs, joining a list of large companies, including Ford Motor and Microsoft, planning layoffs. Weekly jobless claims, reported Thursday, offered a different picture, falling to 213,000, their lowest level since early summer.

Thursday also brought closely watched retail sales data. The Labor Department reported that a 4.2% decline in spending at gas stations in August helped foster solid increases in spending on cars, “miscellaneous stores,” and restaurants and bars. Falling gas prices also helped the University of Michigan’s preliminary reading on consumer sentiment for September hit a five-month high, while five-year inflation expectations in the survey fell to 2.8%, the lowest in over a year.

US – Equity Market Performance

Index Friday’s Close Week Ending 9/16/2022 Weekly (+/-) Point Change 9/16/2022 % Change YTD Week Ending 9/16/2022
DJIA 38,822.42  -1329.29 -15.18%
S&P 500 3,873.33  -194.08 -18.73%
Nasdaq Composite 11,448.40 -663.91  -26.82%
S&P Midcap 400 2,380.28  -117.77 -16.25%
Russell 2000  1,798.19  -84.65 -19.91%


US Yields & Bonds

U.S. Treasury yields continued to push higher, particularly on short- and intermediate-term maturities, as disappointing inflation data and a further decline in jobless claims cemented investors’ expectations for a minimum 0.75-percentage-point interest rate hike at the Federal Reserve’s next meeting. According to traders, by midweek, federal funds futures markets were pricing roughly one-third chance of a one-percentage-point Fed rate hike. However, this probability declined somewhat by Friday morning. Amid expectations for continuing rapid monetary tightening, the two-year U.S. Treasury note yield traded around 3.90% early Friday morning—its highest level in nearly 15 years.

The broad municipal bond market traded lower, with persistent outflows from mutual funds industrywide impeding market performance. While selling pressures in the secondary market continued, Traders I spoke with observed intense bidding activity for several primary market deals, reflecting issuer concessions to meet buyer demand in the rising rate environment.

Rising U.S. Treasury yields weighed on the U.S. investment-grade (IG) corporate bond sector, but corporates proved resilient after the CPI release. Higher yields also somewhat drove demand for IG corporate bonds. Our traders reported that the high-yield bond market advanced as the week began, with investors mainly focused on sourcing BB and B-rated bonds amid positive flows to the asset class. Despite limited new issuance, our traders noted that a few significant mergers and buyout deals are still expected later in the month.

Bank loans rallied ahead of the CPI print as investors seemed to consider that we may have passed peak inflation. The limited primary calendar helped drive the positive momentum. However, the loan market turned lower along with broader risk markets following the hotter-than-anticipated inflation reading.

US Treasury Markets – Current Rate and Bi-Monthly Change

3 Mth +0.08 bps to 3.09%
2-yr: +0.31 bps to 3.87%
5-yr: +0.19 bps to 3.63%
10-yr: +0.14 bps to 3.45%
30-yr: +0.07 bps to 3.51%


Interesting News Overseas

Last week shares in Europe pulled back amid signs of a deepening economic slowdown. The pan-European STOXX Europe 600 Index ended 2.89% lower in local currency terms. Germany’s DAX Index slid 2.65%, France’s CAC 40 Index lost 2.17%, and the UK’s FTSE 100 Index declined 1.56%. Italy’s FTSE MIB Index finished roughly flat.

The British pound depreciated against the U.S. dollar, sinking to levels that last hit in 1985. Fears of a looming recession contributed to this downward pressure, along with concerns that the Bank of England might deliver an interest rate hike of 0.5 percentage points at its next meeting, a smaller increase than the U.S. Federal Reserve is expected to announce.

Yields on 10-year German government debt rose as hawkish comments from European Central Bank policymakers raised expectations of more significant rate increases. Peripheral eurozone government bonds broadly tracked core markets. British 10-year government bond yields increased to their highest level in over a decade.

Inflation in the UK came in at 9.9% in August. This reading marked a decline from the 10.1% registered in July. Falling fuel prices drove this slowdown. However, core inflation, which excludes food and energy costs, quickened to 6.3% from 6.2%. Producer output (factory gate) prices were up 16.1% from levels a year ago—still elevated but improved from 17.1% in July.

Japan’s stock markets fell over the week, with the Nikkei 225 Index dropping 2.29% and the broader TOPIX Index declining 1.37%. The Japanese government announced that it would drop its COVID-related ban on individual tourists and remove its limit on daily international arrivals to the country. Trade data for August showed that Japan’s exports grew 22.1% from August 2021, building on a 19% annual increase in July. Japan’s top export market was the U.S.

The Japanese currency finished around JPY 143 against the U.S. dollar from about JPY 142 the prior week. Rumors circulated midweek that the Bank of Japan (BoJ) would intervene in currency markets to stem the yen’s slide against the U.S. dollar, but the central bank ended up taking no action. The Fed’s rapid rate hikes while the BoJ stands pat have helped drive the yen steadily lower against the greenback in 2022.

Lastly, China’s stock markets fell as currency weakness, and downbeat property data overshadowed surprisingly strong factory output and retail sales indicators. The broad, capitalization-weighted Shanghai Composite Index tumbled 4.2%, and the blue-chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, sank 3.9% in its most significant weekly drop in two months, Reuters reported.

The People’s Bank of China drained liquidity from the banking system for the second month. Still, it held interest rates steady as it sought to ease selling pressure on the yuan resulting from a widening policy divergence with the Federal Reserve. China’s central bank has recently set a string of stronger-than-expected yuan fixings against the U.S. dollar and reduced banks’ foreign reserves requirement to stabilize the currency.

The Fed’s hawkish stance has boosted the dollar this year, pressuring most emerging market currencies. In contrast, China’s surprise decision to lower key interest rates in August has accelerated the yuan’s slide. Late Friday, the yuan traded at 7.0185 per dollar versus 6.9225 a week earlier, weakening past the psychologically critical 7 per dollar level for the first time in two years. The onshore and offshore yuan fell to their lowest level since July 2020. The 10-year Chinese government bond yield rose to 2.692% from 2.663% a week ago, ahead of a potentially outsized U.S. rate hike this week.

This Week Ahead

This week all eyes will be on the Fed’s rate decision on Wednesday. A hotter-than-expected US inflation reading and signs that the job market remains robust cemented expectations for a third consecutive 0.75 percentage point rate hike, a move that would lift the fed funds rate to a target range of 3% to 3.25%. While less likely, signs of inflation becoming entrenched sparked speculation that a full percentage point increase could be on the table. Investors will also keep a close on building permits and existing home sales data for further detail about the housing market. Other releases in the US calendar include US S&P Global PMI for September.

Have a great week!

Stephen Colavito

Stephen Colavito, Jr.
Chief Investment Officer
Perigon Wealth Management, LLC

D,M: 404.313.1382

This message is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell securities or other financial instruments. Past performance is not a guarantee of future results. Perigon Wealth Management is a registered investment adviser. More information about the firm can be found in its Form ADV Part 2, which is available upon request by calling 415-430-4140 or sending an email request to

Written by Perigon Wealth

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