September 27 to October 1, 2021

What happened last week in financial markets

Bond yields rose and oil prices surged

The Dow Jones Industrial Average and Canada’s TSX outperformed the S&P 500 and the Nasdaq on Monday after the benchmark 10-year U.S. Treasury Yield briefly crossed 1.5% and crude oil prices settled at their highest level in almost three years. Value stocks and the financial sector helped the Dow outperform its peers on Wall Street, ending the day 0.2% higher. The S&P and the Nasdaq, with their heavier weighting toward growth and technology stocks, fell 0.3% and 0.5% respectively.

The TSX, with its heavy weighting toward the energy sector, rose alongside global oil prices, as Brent crude topped US$78 per barrel and U.S. benchmark West Texas Intermediate closed above US$75. With inventory in the U.S. falling sharply in the wake of Hurricane Ida and global demand nearing pre-pandemic levels, analysts at Goldman Sachs have now raised their year-end forecast for Brent crude to US$90 per barrel (up from US$80).

Yellen warned lawmakers over looming U.S. debt default

On Tuesday, rising treasury yields, and falling technology and growth-oriented stocks, contributed to losses across all four major North American benchmark indexes. But the largest accelerator of market declines stemmed from investor fear over a possible U.S. government shutdown and the risk of the nation defaulting on its loans. In a letter to congressional leaders, Treasury Secretary Janet Yellen warned that failure to suspend or raise the federal debt limit would have “catastrophic” results. She predicts that the Treasury will run out of money by October 18 unless legislative action is taken. “At that point, we expect the Treasury would be left with very limited resources that would be depleted quickly,” Yellen wrote. “It is uncertain whether we could continue to meet all the nation’s commitments after that date.” One day prior, senate Republicans rejected a Democratic move to raise the debt limit.

September ended on a losing note for the benchmark indexes

Despite legislation passing in the U.S. Congress on Thursday that will guarantee continued funding of the government through December 3 – thereby avoiding a shutdown – the major U.S. stock indexes ended the day, month and third quarter on a bleak note. The Dow fell 1.6% on the day, 4.3% for the month and 1.9% over Q3. The S&P 500 was down 1.2% on the day, 4.8% for the month, but up slightly (0.2%) over the quarter. The Nasdaq declined 0.4% on the day, 5.3% for the month and 0.4% over the quarter. This marks the first quarterly loss for the Dow and the Nasdaq since March 2020. In Canada, the TSX saw a daily decline of 0.4%, a monthly drop of 2.6% and a quarterly loss of 0.5%.


The stock and bond market*
INDEX CLOSE WEEK YTD
S&P/TSX Composite 20,150.87 -1.23% 15.59%
Dow Jones Industrial Avg. 34,326.46 -1.36% 12.15%
S&P 500 Index 4,357.04 -2.21% 16.00%
Nasdaq Composite 14,566.70 -3.20% 13.02%
10-yr GoC Yield 1.47% 0.09% 0.80%
10-yr U.S. Treasury Yield 1.48% 0.01% 0.55%
WTI Crude Oil (US$/bbl) 75.74 2.38% 56.10%
Canadian Dollar US$0.7903 0.22% 0.62%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending October 1, 2021. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.


What’s ahead

U.S. employment data: With U.S. Federal Reserve officials tying reduction of $120 billion in monthly bond purchases to job growth, all eyes will be on the September employment data scheduled for release on Friday. In August, the country added 235,000 jobs, far below the 750,000 jobs analysts were expecting.

Circle these dates

  • October 11: Canadian markets closed for Thanksgiving Day
  • October 27: Bank of Canada monetary-policy update
  • November 2-3: U.S. Federal Reserve meetings and statement
  • November 25: U.S. markets closed for Thanksgiving Day

Key take-away

Trust that you’re making the right decisions. Your goals, and the investments you select as a result, are based on your personal situation and your vision of the future. That doesn’t mean you have to take the journey alone. Working with a financial representative can help you navigate your roadmap to your financial future.


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