Stock Market This Week – 09/09/23

Stock Market This Week

Stock Market This Week – 09/09/23

The stock market struggled this week because of anxiety about more interest rate increases. The cause is higher oil prices, driven by OPEC+ cutting oil output. In addition, the labor market remains tight, and jobless claims have declined for four consecutive weeks. Inflation is still lower than last year, but further declines may take longer than anticipated. Economic data like these results puts the U.S. Federal Reserve in a difficult spot. If the coming Consumer Price Index (CPI) reading comes in higher than expected, rates may be increased again.

Stock Market Overview

As shown by data from Stock Rover*, the stock market performed poorly this week, with all the leading indices and composites declining. The Dow Jones Industrial Average (DJIA) was the best-performing index, followed by the S&P 500 Index, the Nasdaq Composite, and the Russell 2000.

Nine of the 11 sectors decreased this week. Energy, Utilities, and Consumer Defensive were the top three sectors for the week. But the Technology, Basic Materials, and Industrials sectors performed worst.

The Energy sector continued its upward trend because oil prices are gaining. They rose to ~$87+ per barrel. The VIX increased nearly 6% but remained below the long-term average. The cost of gold settled at $1,943 per ounce, supported by central bank purchases to build gold reserves and renewed consumer demand.

The Nasdaq is performing the best for the year, followed by the S&P 500 Index, the Russell 2000, and the Dow 30. The Nasdaq remains in a bull market, and the S&P 500 is three percentage points away. In addition, nine of the 11 sectors are up year-to-date. The three best-performing sectors are Technology, Communication Services, and Consumer Cyclical. But the worst-performing sectors are Consumer Defensive, Healthcare, and Utilities.

The dividend growth investing strategy has returned to positive results across all categories. The recent market volatility has lowered returns, but the trend has reversed. The table below shows their performance by category.

Category	YTD Return (%)
Dividend Kings	-1.4%
Dividend Aristocrats	+4.7%
Dividend Champions	-0.2%
Dividend Contenders	+0.9%
Dividend Challengers	+1.0%

Stock Market Valuation This Week

The S&P 500 Index trades at a price-to-earnings ratio of 25.45X, and the Schiller P/E Ratio is about 30.64X. These multiples are based on trailing twelve months (TTM) earnings.

The long-term means of these two ratios are approximately 16X and 17X, respectively. 

The market is still overvalued despite the recent correction and a bear market and rebound. Earnings multiples of more than 30X are overvalued based on historical data.

Economic News This Week

Provided by Stock Rover*.

Services PMI

The ISM® (Institute for Supply Management®) Services PMI® rose to 54.5% in August from 52.7% in July. Economic activity grew in the services sector for the eighth consecutive month. The sector has registered growth in 38 of the last 39 months. The only contraction since June 2020 was December 2022’s 49.2% reading—thirteen of 18 industries expanded in August, down from fourteen in July. Prices paid accelerated monthly as the Prices Index reported up 2.1 percentage points 58.9%. Employment activity grew for the third consecutive month, as the Employment Index registered 54.7%, up four percentage points from July’s reading. New Order also accelerated as ISM®’s New Orders Index reported 57.5% in August, up 2.5 percentage points from the previous month. This is the strongest reading since February 2023. 

The New Orders Index showed expansion for the eighth consecutive month. Twelve industries reported an increase in new orders in August, while three reported a decrease in new orders. Supplier delivery times registered 48.5%, up from 48.1% in July. Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases. The ISM® Services Backlog of Orders Index contracted in August, tumbling 10.3 percentage points to 41.8%, and follows an expansion reading in July preceded by four months of contraction and 26 straight months of growth before that.

Jobless Claims

The Labor Department reported a decrease in initial jobless claims for the week ending September 2nd. The seasonally adjusted initial claims reported 216,000, a decrease of 13,000 from the previous week’s upwardly revised level. The four-week moving average, which smooths out volatility, was 229,250, an increase of 8,500 from last week’s upwardly revised average. For the week ending August 26th, the insured unemployment rate decreased (-0.1%) to 1.1%. The total number of unemployment claims for the week ending August 26th was reported at 1.679M, a decrease of 40,000 from the previous week’s downwardly revised level. The continuing claims’ 4-week moving average was 1.702M, a decrease of 1,250 from last week’s downwardly revised level. 

According to the unadjusted data for the week ending September 2nd – Ohio (-2,909), New York (-2,144), and Oregon (-801) led the way in decreases for initial claims. Missouri (+3,066), California (+957), and Indiana (+713) led the way in increases. Of the 53 states and U.S. territories, 28 reported a drop in initial claims, and 25 reported an increase. For the week ending August 19th, 1.815M people received jobless benefits through state or federal programs, a decrease of 13,025 from the previous week. There were 1.415M weekly claims filed for the comparable week in 2022.

Weekly Oil Status Report

The US Energy Information Administration reported that US commercial crude oil inventories decreased by 6.3M barrels to 416.6M (4% below the five-year average) for the week ending September 1st. Gasoline inventories declined by 2.7M barrels (5% below the five-year average), and distillate inventories increased by 0.7M barrels (14% below the five-year average). Total commercial petroleum inventories increased by 0.4M barrels. Crude oil refinery inputs averaged 16.6M barrels per day, an increase of 20K per day compared to the previous week’s average. 

Refineries operated at 93.1% of their operable capacity, as gasoline production decreased to an average of 9.8M barrels per day and distillate fuel production fell to 5.0M barrels per day. Crude oil imports came in at 6.8M barrels per day, an increase of 154K per day compared to the previous week. Crude oil imports averaged about 6.9M barrels per day over the last four weeks, 9.7% more than last year. Total motor gasoline imports averaged 982K barrels per day, and distillate fuel imports averaged 130K barrels per day.

Resources

• Stock Market Holidays
• Investor Relations Guides
• Checking and Savings Account Resources
• Dividend Investing Resources
• Reviews

Curated Weekend Reading From Around The Web

Portfolio Management and Investing

• The 60/40 Portfolio is Alive & Well (A Wealth of Common Sense)
• How to Avoid Getting Burned by the AI Hype (What Goes Up)
• How to Use Cash in a Portfolio (Morningstar)

Retirement

• How to Ask for A Raise and Actually Get It (TSIR)
• How Much Does It Cost to Build A House (Architectural Digest)
• My husband just retired. I’m scared to death of running out of money. (The Washington Post)

Financial Independence

• My Rule for Avoiding Lifestyle Creep (Money with Katie)
• Feeling Mortgage-Rate Envy? You’re Not Alone (The New York Times)
• Trader Joe’s: The Anti-Grocer (Sat Post by Trung Phan)