US market weekly: S&P 500 ends lower amid inflation concerns, debt ceiling debate

US market weekly: S&P 500 ends lower amid inflation concerns, debt ceiling debate

Last updated: 02 Oct, 2021 | 10:34 am

US market weekly: S&P 500 ends lower amid inflation concerns, debt ceiling debate

US indices started off with mixed sentiments on Monday as investors closely monitored developments of a possible government shutdown due to a short term spending bill and debt ceiling disagreement. The benchmark 10-year yield gains rose to 1.5%, reaching its highest level since June on the back of optimism over the economic recovery. This in turn led to a sell-off in megacap tech stocks.

US stocks fell sharply on Tuesday with tech stocks dragging down the market as Treasury yields rose to 3 month high. Investors were also cautious due to a possible default, in case the debt limit ceilings remain unchanged.

The US indices saw partial rebound on Wednesday after the Fed chairman Powell’s remarks that supply chain disruptions lifting inflation rates around the globe are temporary. However, the ongoing debt ceiling debate kept a check on the gains.

The US stocks fell sharply on Thursday as rising covid cases, inflation fears and budget disagreements weighed on sentiments. Though Congress passed a bill to avoid government shutdown, they have not raised the debt ceiling limits.

The US indices ended higher on Friday though fears are mounting about slowing economic growth, uplifted inflation, supply-chain bottlenecks, a global energy crunch and regulatory risks emanating from China. For the week, S&P 500 ended 2.2% lower and Dow Jones 1.4% lower. 

Weekly market stats with IND

Let’s see the major developments during the week:

Debt ceiling limits: The possible partial government shutdown was averted late in the week when President Joe Biden signed a short-term spending bill. However, no progress was made in raising the federal debt limit. Treasury Secretary Janet Yellen warned again that the limit needed to be raised in order for the Treasury to meet its obligations due on October 18th. While most analysts say that an actual default on the country’s debt is highly unlikely, especially given that Democrats may use other tools to raise funding, they point out that there was substantial market volatility during a similar situation 10 years ago. 

Supply constraints fuel inflation worries: The week’s inflation data came in-line with street expectations.. However, continuing reports of supply-side disruptions continued to weigh on sentiment. For eg: shares of Nike, Bed Bath & Beyond, and Kohl’s fell sharply, after the companies reported stressed supply chains and higher labor costs ahead of the holiday shopping season. The recent surge in oil prices, which benefited energy stocks, also raised broader inflation worries.

Delta variant remains a concern: The spread of the delta variant appears to have dented consumer confidence and disrupted the momentum in job growth. An average of roughly 1.09 lakh coronavirus cases has been reported each day in the United States while the total cases have crossed the 43.6 million mark. However, to battle this, the pace of vaccination has not picked up. About 56% of the eligible American population (age 12 and over) are fully vaccinated and over 65% have received the first dose.

Oil prices at 3 year high: Oil settled above $78 a barrel on Friday, just below a 3 year high reached earlier this week, on expectations that OPEC ministers will maintain a steady pace in raising supply. The group is slowly unwinding record output cuts made last year, although sources say it is considering doing more to boost production. Brent crude rose 1.2%, to settle at $79.28 its fourth weekly rise. Brent has risen over 50% this year and reached a 3 year high of $80.75 on Tuesday.