QVMM - The S&P 500 Loses Its Silvery Luster

2023-09-11 15:06:00 ET

Summary

• The S&P 500 index declined by 1.3% during the trading week ending on Friday, 8 September 2023, closing out the Labor Day-holiday shortened week at 4457.49.
• The biggest trouble for the S&P 500 came on Wednesday, 6 September, when news came China's leaders would order Chinese government agencies to stop using iPhones.
• Apple (NASDAQ: AAPL) is the biggest single component of the S&P 500 index, so a bad day for Apple's stock automatically weights the index down.
• Apple's stock price dropped by 6% by the end of the week, accounting for about a third of the index's overall decline by itself.

The silver lining investors found in the S&P 500 (Index: SPX ) in the previous trading week lost some of its luster. The index declined by 1.3% during the trading week ending on Friday, 8 September 2023, closing out the Labor Day holiday-shortened week at 4457.49 .

Most of that decline took place during the first two trading days of the week, as oil prices rose and signs of bigger trouble developed in both China and the eurozone. But the biggest trouble for the S&P 500 came on Wednesday, 6 September, when news came China's leaders would order Chinese government agencies to stop using iPhones. Apple ( AAPL ) is the biggest single component of the S&P 500 index, so a bad day for Apple's stock automatically weights the index down. Apple's stock price dropped by 6% by the end of the week, accounting for about a third of the index's overall decline by itself.

For the entire index, the week's decline puts its trajectory close to the middle of the latest redzone forecast range on the latest update to the alternative futures chart.

Other stuff also happened during the past week, which probably accounts for the rest of the S&P 500's downward movement. Here's our summary of the week's market-moving headlines.

Tuesday, 5 September 2023

• Signs and portents for the U.S. economy:
  • Oil prices settle at 10-month high as Saudi, Russia extend supply cuts
• Fed officials, excited to sit on hands rather than raise rates again, claim increasing use of the emergency lending facility isn't because of emergency:
  • Waller says recent data gives Fed space to decide next interest rate move
  • Rising demand for Fed bank lending program not a sign of stress
• Bigger trouble developing in China:
  • China's exports, imports likely contracted more slowly in August: Reuters poll
  • China's August services activity slows amid sluggish demand - Caixin PMI
  • Analysis: Part of China's economic miracle was a mirage. Reality check is next
• Bigger bailout developing in China:
  • China's state planner to set up special bureau to support private economy
• BOJ officials, getting mixed economic signals, won't give up never-ending stimulus just yet:
  • Japan household spending suffers biggest drop in 2-1/2 years; outlook not as gloomy
  • Japan Aug service activity growth fastest in 3 months - PMI
  • Reaching 2% inflation goal necessary for BOJ easy policy exit, says ex-board member Kataoka
• ECB officials getting results they wanted from rate hikes, thinking about more:
  • Eurozone August downturn deeper than was thought -PMIs
    • German service sector activity shrinks in Aug for first time in 2023 -PMI
    • French services sector shrinks more than first thought in Aug -PMI
    • Italy's service sector contracts in August for first time in 2023 -PMI
    • Rising debt cost to weigh on eurozone GDP - HSBC
  • ECB chief economist says easing inflation welcome but must continue -report
• Nasdaq, S&P, Dow end slightly lower to kick off first full week of September

Wednesday, 6 September 2023

• Signs and portents for the U.S. economy:
  • Oil settles up on expectations of U.S. crude draws and tight supply
  • Panama Canal water levels at historic lows, restrictions to remain
  • US services sector picked up in August, along with prices
• Fed officials claim they will remain calm, analysts see risk of policy error:
  • Fed's Collins says now is time to be patient, deliberate with policy
  • Possible Fed overtightening makes recession more likely than not, Deutsche Bank says
• Bigger trouble developing in China:
  • China July-Aug economic losses from disasters double from first six months
  • China's exports, imports likely contracted more slowly in August: Reuters poll
• ECB officials say they don't know what they're doing, but are thinking about it:
  • ECB policymakers say Sept rate decision still up in the air
  • ECB should raise rates next week, then pause, Kazimir says
• Wall St slides as economic data stokes inflation and interest rate worries
  • Apple slips as China reportedly orders government agencies to stop using iPhones

Thursday, 7 September 2023

• Signs and portents for the U.S. economy:
  • Oil falls on concerns about China, winter demand
    • Brent falls below $90/bbl, pausing rally, on weaker demand outlook
  • U.S. mortgage rates fall for a second week but hold above 7%
• Fed officials suggest they might be done with rate hikes:
  • Fed's Williams: An 'open question' whether Fed will need to hike again
• Bigger stimulus developing in China:
  • China's major banks to lower rates on existing first-home mortgages
• Bigger trouble developing in China as trade data shows economy still slowing, but more slowly:
  • China's trade slump narrows as stabilisation signs emerge
• BOJ officials want to keep never-ending stimulus alive:
  • BOJ policymaker calls for keeping ultra-easy policy, sets high bar on exit
• Central banks starting to go into reverse on rate hikes:
  • Polish central bank stuns with 75 bps rate cut, zloty plunges
• Bigger trouble developing in the eurozone:
  • German industrial output falls more than expected in July
• Nasdaq, S&P end in the red, with Apple falling more than 6% in two days; Dow bucks trend
  • Apple slips again on China worries; issue is 'way overblown,' analysts say

Friday, 8 September 2023

• Signs and portents for the U.S. economy:
  • Oil prices rise to 9-month high on worries about tight supply
• Fed officials excited to sit on hands rather than hike rates, thinking about digital currency instead:
  • Fed policymakers to sit tight on rates, debate if more is needed
  • Fed's Barr says central bank 'a long way' from any decision on issuing digital currency
• Bigger stimulus developing in China:
  • Nanjing scraps home-buying curbs in China's latest property boost
• BOJ officials get reasons to keep never-ending stimulus alive
  • Japan cuts Q2 GDP on weak spending, wages slide
  • Japan real wages fall for 16th straight month in July
• ECB officials getting results they wanted from rate hikes:
  • Citigroup cuts 2023 euro area real GDP growth forecast to 0.4%
    • German economy expected to contract by 0.4% in 2023 - DIW
    • German economy faces meagre growth in medium term - IfW
• Nasdaq, S&P, and Dow finished slightly higher to end the holiday-shortened week

The CME Group's FedWatch Tool was comparatively unchanged in the past week. It continues to show no rate hike when the Fed next meets on 19-20 September (2023-Q3). After which, the tool projects the Fed will hold rates steady until 1 May (2024-Q2), which is expected to mark the first of a series of quarter-point rate cuts continuing at six- to twelve-week intervals through the end of 2024.

The Atlanta Fed's GDPNow tool held steady in forecasting an annualized real growth rate of +5.6% during 2023-Q3. That's well above the so-called "Blue Chip Consensus" that anticipates real GDP growth during 2023-Q3 somewhere in a range between +1.1% and +3.4%, with a mid-range estimate of about +2.4%.

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Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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