Mid-Week Market Minute 9.27.23

Stocks Lower in Early Trading; New Home Sales, Durable Goods Orders Data

Stocks around the globe were lower in early trading this week as markets look to close the door on a disappointing September for both stocks and bonds. For September, the S&P 500 is on pace to finish lower by nearly 5% as stocks in the technology sector led the way lower. Stocks in the energy sector are on pace to be the lone gainer for the month, higher by about 2% on the heels of higher oil prices. Despite headwinds from a stronger dollar, international developed and emerging market stocks are on pace to outperform domestic stocks, with the MSCI ACWI ex US index lower by about 3%. In bonds, higher interest rates continued to put downward pressure on bond prices, and the Bloomberg Taxable Bond index is lower by about 2% for the month. Despite these recent challenges, a globally diversified 60/40 portfolio is still higher by about 5% on the year.

On the data front, new home sales and consumer confidence data this week missed consensus estimates. On the positive side, durable goods orders for August came in stronger than expected, helping to validate economic growth that has been better than expected. The latest GDPNow data from the Federal Reserve Bank of Atlanta now shows a GDP estimate of 4.9% for the third quarter, with an updated estimate due out later this week. 

Looking forward, the markets will remain focused on the Fed as rising rates have recently put pressure on both stocks and bonds amid fears that the Federal Reserve could keep monetary policy tighter for longer than expected. In addition, investors are bracing for the possibility of a government shutdown Oct. 1, adding to angst in the markets. Given the Fed has said they will continue to be data-dependent in determining future monetary policy, a shutdown could make their job more difficult. In the event of a prolonged shutdown, the Bureau of Labor Statistics would not report the September jobs data (Oct. 6), the CPI inflation data (Oct. 12), and possibly even the first estimate of third-quarter GDP (Oct. 26). Outside of potential short-term disruptions, we do not view the threat of a shutdown as having a meaningful impact on economic growth or the long-term trajectory for the markets.

Source: GSAM, CNBC, JPMorgan

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