Markets “In a Nutshell” for September 18, 2023
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 0.70%, the S&P 500 was down 1.30%, and the NASDAQ fell 1.90%. Foreign stocks (MSCI EAFE) were also down, falling 1.30%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.26%. (Data source: Wall Street Journal)
CPI Rises Due to Energy
The August CPI report was released last week and came in line with expectations at 3.7% year over year. This is a large increase from the 3.2% we saw in July, mainly caused by the increase in energy prices in the past month. When looking at the core CPI, which excludes food and energy, it moved lower to 4.3% from the 4.7% we saw in July. This is moving in the right direction as the Fed would like to continue to see inflation move lower in both the CPI and core CPI data. Higher energy prices also get priced into other goods and services as it costs more to transport goods and get places. For example, airline fares increased for the first time since March as a result of higher jet fuel prices. While CPI moved higher overall, the report was not as bad as the headline number makes it look as the main driver was just in one area, energy.
The consumer is the main driver in the US economy and continued to spend helping the economy stay strong during the rapid rate hikes we have seen. Retail sales rose 0.6% in August compared to July and well above the 0.1% rise that was expected. This was also due to higher gasoline prices as when you take out gasoline, the rise was only 0.2%. Spending has been coming down to more normal levels as consumers have the excess savings we saw the past 3 years has been drawn down. The other headwind for consumers is higher borrowing costs and moderating wage gains. Consumer debt has also been on the rise as credit card debt is over $1 trillion and nearly 50% of cardholders carry debt month-to-month, up from 39% in 2021.
By what percentage have oil prices increased in 2023? (Scroll Down for Answer)
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4. 14%. Higher oil prices have caused the headline CPI number to jump of recent. Higher oil prices also tend to seep into the rest of the economy as it becomes more expensive to move goods and travel costs become higher for consumers.