Due to their lack of upward progress since mid-July, the major market averages look as though they have hit the ceiling. However, as we saw on Wednesday, the market averages aren’t giving up much ground either, as stocks rallied to recover nearly all of the losses earlier in the week. Though the Standard & Poor’s 500 rose 0.43 percent and the Nasdaq Composite gained 0.50 percent, not all sectors of the market were a winner on Wednesday. This was particularly true of dividend-paying sectors like utilities and real estate.
It was the ninth negative day in a row for the Dow Jones U.S. Utilities index, which slid another 0.28 percent, and the fifth negative day in a row for the Dow Jones U.S. Real Estate index, which fell 1.93 percent on Wednesday.
Just two months ago, the utilities, real estate and telecommunications sectors were among the top performers of the year, but recent declines in these sectors over the past few weeks have brought them back to Earth. Though some blame overvaluations of the sectors for their latest losses, concerns over higher interest rates are beginning to filter their way back into the markets as well. This could be seen in falling bond prices in both the U.S. and Europe after a media report discussed the probability that the European Central Bank could begin scaling back its quantitative easing program before it is scheduled to end next March. The potential impact of rising interest rates is certainly something to be closely followed.
On Wednesday, the U.S. crude oil price continued higher, closing at $49.70 per barrel after the weekly EIA petroleum status report indicated a 3.0 million-barrel decline in inventory levels. There was additional good news on the economy from the ISM non-manufacturing index for September coming in a 57.1, well above consensus and the prior month’s reading of 51.4. Any reading of 50 or above indicates expansion. Of course, investors are most interested in the September U.S. employment report due out on Friday.
The top-performing countries for the week appear to be getting a boost from rising commodity prices such as crude oil. At the front of the pack of this week’s leaders is the MSCI Norway IMI index, gaining 3.88 percent over the past five trading days, followed by the MSCI All Argentina index, up 3.71 percent over the same period.
Reno Gazette Journal, 10-6-2016