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Stock Market Slides as Inflation Pressures Continue

Weekly Update – November 12, 2021

  • The S&P 500 index fell 0.3% last week, its first weekly drop since the final week of September, as inflation worries ramped up amid a larger-than-expected rise in the US consumer price index.
  • The S&P 500 ended the week at 4,682.85, down from last Friday’s closing level of 4,697.53, which had been a new closing high at the time. It moved higher yet on Monday to a new record closing high of 4,701.70 but closed below that every day since then.
  • Despite last week’s decline, the S&P 500 is still in positive territory for November, up 1.7% for the month to date. The market benchmark is up 25% for the year to date, with just seven weeks remaining in 2021.
  • The index’s strong climb last year has come amid the recovery of the US economy from the widespread, pandemic-related closures that were seen in 2020. Many companies have been reporting financial results above analysts’ expectations and many economic reports have also topped economists’ estimates. However, price increases have also been an underlying worry, and the October consumer price data released last week brought that concern to the forefront.
  • The US seasonally adjusted consumer price index, a measure of inflation, rose by 0.9% in October, ahead of expectations for a 0.6% increase, according to data released Wednesday by the Bureau of Labor Statistics. Core CPI, which excludes food and energy prices, rose by 0.6%, faster than the consensus estimate for a 0.4% increase. The year-over-year rates for overall and core CPI accelerated to 6.2% and 4.6%, respectively, from 5.4% and 4% in the previous month.
  • The consumer discretionary sector had the largest percentage drop of the week, falling 3.2%, amid the consumer price concerns. That was followed by a 1.7% decline in energy, a 1.1% slip in utilities and a 0.5% drop in communication services. Consumer staples and real estate also edged lower.
  • Five sectors still ended the week in positive territory: Materials climbed 2.5%, followed by a 0.6% rise in health care and a 0.4% increase in industrials. Financials and technology also eked out slight gains.
  • The consumer discretionary sector’s hardest-hit stocks last week included shares of casino and hotel operators. Shares of Penn National Gaming (PENN) fell 5.7%, MGM Resorts International (MGM) dropped 10% and Las Vegas Sands (LVS) declined 6.9%.
  • The energy sector’s drop came as crude oil futures moved lower. Among the decliners, shares of Occidental Petroleum (OXY) shed 4% while Coterra Energy (CTRA) slipped 4.5%.
  • On the upside, the materials sector’s gains came amid a climb in gold futures to five-month highs as inflation worries attracted investors to the metal as a hedge against rising costs. Shares of gold miner Newmont (NEM) rose 4.2% on the week.
  • Next week, economic data in focus will include October retail sales, industrial production and capacity utilization on Tuesday, followed by October building permits and housing starts on Wednesday and weekly jobless claims on Thursday.

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