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U.S. stocks posted their best weekly gain since July last week, as the S&P 500® The index rose 1.8 percent. In the process, the index returned to its 50-day moving average, after spending two weeks flirting with its 100-day moving average. Investors chose to ignore September’s rise in the Consumer Price Index from 5.3% to 5.4%, and another nearly $ 3 a barrel increase in the price of oil. Instead, the focus was on strong third quarter bank earnings, which set a positive tone at the start of the earnings season, and core inflation, which remained unchanged at 4.0%.

So far in October, the S&P 500 has climbed 3.8%, reversing its September slump, and is now just 1.4% below its September 2.sd closing record of 4,536.95. Only communication services among the eleven sectors of the index suffered a loss last week, pushed down by a decline in Facebook, which represents 20% of the group. Otherwise, there were gains across the board, led by materials, real estate and consumer discretionary, which each rose 3.5% or slightly better. Health care and basic consumer goods have lagged behind.

Although the last two monthly employment reports have been disappointing, weekly jobless claims data remain encouraging. Initial claims last week fell below 300,000 for the first time since March 2020 just before surpassing 6 million. Continuing complaints followed suit. Claims data will likely strengthen the view that the Fed’s threshold for further substantial progress towards full employment has been reached, paving the way for a cutback announcement in two weeks. The minutes of the Fed’s September meeting hardly suggested otherwise.

Retail sales show surprising strength; Consumer sentiment softens

The other major economic release last week, retail sales, surprised with its strength. Despite lingering parts problems among automakers, car sales rose for the first time in five months. September’s gauge rose 0.7%, defying expectations of a 0.2% drop. And the August report has been revised upwards.

Conversely, consumer confidence has eased. The University of Michigan’s preliminary October report showed a modest decline, following a slight increase in September. This was the third decline in the past four months and was accompanied by a corresponding increase in the expected rate of year-over-year inflation, from 4.2% in June to 4.8% in October . More encouragingly, however, the expected 5-10 year inflation rate has remained anchored at 2.8%, with consumers seeming to agree with the Fed and investors in general that the current rise in inflationary pressures has subsided. will ultimately prove to be temporary. True, there are others, perhaps a growing minority, who fear inflation will persist longer than the general consensus.

The yield on ten-year Treasuries fell four basis points to 1.57%, in a shortened holiday week for bonds. The dollar also eased slightly after five straight weeks of gains, and the VIX index returned to its lowest close since mid-August at 16.4 after starting the month at 21.2.

The earnings season is accelerating this week; China shows weak economic growth

After a better-than-expected start for the big banks, the earnings season is accelerating this week. According to Factset, the mixed profit growth rate for the quarter climbed to 30.0% from 27.5 at the end of September. And expected revenue growth fell from 15.1% to 15.1%. Regional and smaller banks on the calendar this week will be monitored for any signs of elusive increases in lending. 16% of the S&P 500 is expected to release results this week, including non-banking names such as Netflix, J&J, IBM, American Express, Intel, Verizon, American Express and Proctor and Gamble.

Overseas, China recorded economic growth of 0.2% in the third quarter, half of the expected pace. The year-on-year growth rate fell to 4.9% from 7.9% at the end of the second quarter. Aside from the pandemic-induced recession in 2020, this is the lowest year-over-year growth rate in China in 30 years. Energy shortages, economic reengineering, the Delta variant, and supply chain disruptions have all combined to depress economic activity. For the same reasons, the IMF last week lowered its forecast for global GDP for 2021 to 5.9% from its forecast of 6.0% in July.

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Opinions expressed are as of the date indicated, may change based on market trends or other conditions and may differ from views expressed by other associates or affiliates of Ameriprise Financial. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether on its own behalf or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into account the individual situation of investors.

Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but the accuracy and completeness cannot be guaranteed by Ameriprise Financial. They are given for information only and do not constitute a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.
There are risks involved in investing, including the risk of losing capital.

A 10-year Treasury bill is a debt obligation issued by the United States government that matures in 10 years. The 10-year yield is Store investments involve risk, including loss of capital. High quality stocks may be suitable for certain investment strategies. Make sure your investment goals, time horizon, and risk tolerance are aligned with investing in stocks, as they may lose value.

The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) is a widely used measure of market risk. It shows the market expectation of 30 days volatility. The VIX is constructed using the implied volatilities of a wide range of options on the S&P 500 Index. VIX values ​​above 30 are generally associated with high volatility resulting from increased uncertainty, risk. and fear of investors. VIX values ​​below 20 generally correspond to stable and stress-free periods in the markets.

Past performance is no guarantee of future results.

An index is a statistical composite that is not managed. It is not possible to invest directly in an index.

Definitions of the individual indices and sectors mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise Research Information section, or through your Ameriprise financial advisor.

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The investment products are not insured by the FDIC, NCUA, or any federal agency, are not deposits or bonds of, or guaranteed by any financial institution, and involve investment risks, including possible loss. capital and fluctuation in value.

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