Stocks Slip to End September, Home Prices Cool at the Fastest Rate in History, Cathie Wood Launches New Fund, The Bank of England Will Suspend the Planned Start of its Gilt Selling Starting Next Week, Apple’s iPhone 14 Production Shows Slowing Demand, Biogen Shares Soar after Alzheimer’s Drug Study Shows Positive Results, Apple Shares Decline After Bank of America Downgrade, The Fed’s Favorite Inflation Gauge Shows That Inflation Accelerated Faster than Expected in August, Russian President Vladimir Putin Declares “Four New Regions of Russia.
1. Stocks Slip to End September
Stocks sank for a third week in a row ending a miserable September. The S&P 500 was down 3% for the week and 9% for the month. The Nasdaq was down 3% for the week and 11% for the month. Finally, the Russell 2000 was down 1.4% for the week and 10% for the month. On the sector front, energy was the sole survivor, rising 2%. In a rare bout of weakness, defensive sectors utilities and real estate led the way lower, plunging 9% and 4%, respectively. Moving into the commodity markets, Crude Oil stabilized after last week’s drubbing. Prices edged higher to close at $79.67/barrel. Aided by a pullback in the U.S. Dollar, Gold bounced back 1% to close at $1,670/Ounce. Meanwhile, bitcoin bucked the bearish trend and gained 3% to $19,420/Coin.
2. Home Prices Cool at the Fastest Rate in History
Ballooning mortgage rates, which have now topped 7%, are hampering the housing market. According to a report released on Tuesday, home prices in July were still higher than they were a year ago, but cooled significantly from June’s gains. Prices nationally rose 15.8% over July 2021, well below the 18.1% increase in the previous month. The 10-City composite, which tracks prices in major metropolitan areas such as New York and Boston, climbed 14.9% year over year, down from 17.4% in June. Managing director at S&P DJI, Craig Lazzara stated: “July’s report reflects a forceful deceleration. The 2.3 percentage point difference between those two monthly rates of gain is the largest deceleration in the history of the index.” The National Association of Realtors also released data showing home prices falling dramatically from June to July. Prices usually fall during that time, due to the strong seasonality of the housing market, but the decline was three times the average decline historically. The share of homes with price cuts reached about 20% in August, which is the largest percentage of haircuts in five years, according to Realtor.com.
3. Cathie Wood Launches New Fund
Cathie Wood’s Ark Invest launched a new venture capital fund, which is targeting individual investors with a minimum investment of only $500. The new venture capital fund invests 70% in private firms and 30% in public companies focused on technologically enabled innovation, and selectively in other venture capital funds. The Ark Venture Fund charges a flat management fee of 2.75%, and does not charge any carried interest or load fees. The total expense ratio of the fund is estimated to be a whopping 4.22%. Ark’s flagship Innovation Fund (ARKK) has been under water all year as Wood’s disruptive darlings have been some of the biggest victims of rising interest rates. ARKK is down 60% this year and off 70% from its 52-week high set last November. Ark Invest stated: “We are doubling down on innovation. Ark is moving from social media and social marketing into social distribution, direct to consumer. Pretty exciting. We are offering investors something they’ve not been able to access before.”
4. The Bank of England Will Suspend the Planned Start of Gilt Selling Starting Next Week
On Wednesday, the Bank of England announced that they will suspend the planned start of its gilt selling next week and begin temporarily buying long-dated bonds in order to calm the market uncertainty. “Gilt” is likely a new term for you. It’s what our friends across the pond call their government bonds. The Central Bank will monitor the “significant repricing” of U.K. and global assets in the next few days, which has hit long-dated U.K. government debt hard. In other words, rising interest rates have created a dumpster fire in the British Pound and bond prices. The Bank of England is trying to put it out. They stated, “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy. In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.”
5. Apple’s iPhone 14 Production Shows Slowing Demand
The new iPhone 14 lineup isn’t doing as well as hoped. A report from Bloomberg showed that Apple produced around 90M units in the second half of the last year. And while the tech giant initially asked its manufacturing partners to make 6M more units for the second half of this year, it has now scaled back to produce devices in line with last year’s levels. The report also shows that the Apple’s iPhone 14 was a small upgrade over the iPhone 13, while the iPhone 14 Pro received more significant upgrades. The company is seeing high demand for the Pro models and is making more production capacity available for those higher-end models. The company’s new device in the lineup, the iPhone 14 Plus, will go on sale next month.
6. Jobless Claims Reach Five-Month Low
According to a Labor Department report that was released on Thursday, jobless claims for the week ended Sept. 24 totaled 193,000, a decrease of 16,000 from the previous week’s downwardly revised total and below the 215,000 Dow Jones estimate as initial filings for unemployment claims fell last week to their lowest level in five months. The drop plunged claims to the lowest level since April 23 and is the first time they fell below 200,000 since early May. Continuing claims, which run a week behind, fell 29,000 to 1.347M. Chief investment officer at Plante Moran Financial Advisors, Jim Baird stated: “The recent decline in layoffs flies in the face of the Fed’s efforts to soften up labor market conditions and knock inflation back down toward its 2% target. The capital markets have heard the Fed, and investors are feeling the pain. But the jobs market? For now at least, it’s not listening.”
7. Biogen Shares Soar after Alzheimer’s Drug Study Shows Positive Results
On Tuesday, an experimental Alzheimer’s drug made by Eisai Co Ltd and Biogen showed signs of slowing cognitive and functional decline in a large trial of patients in the early stages of the disease, signaling a rare win in the drug field. Multiple drug-makers have tried and failed to find an effective treatment for the brain-wasting disease that affects about 55M people globally. The drug, lecanemab, slowed progress of the disease by 27% compared with a placebo, meeting the study’s main goal and also potentially offering hope for patients and their families desperate for an effective treatment. Director of the Mayo Clinic Alzheimer’s Disease Research Center in Rochester, Minnesota, Ronald Petersen stated: “It’s not a huge effect, but it’s a positive effect.” CEO Haruo Naito told reporters in Tokyo: “We’re aiming for a full approval and commercialization of the drug in the United States, Europe, and Japan by the end of 2023.”
8. Apple Shares Decline After Bank of America Downgrade
On Thursday, shares of Apple dropped 4.9% after Bank of America analysts delivered a rare downgrade for the world’s largest company. Analysts lowered their rating from buy to neutral, also cutting the price target from $185 to $160 per share. They said they anticipated “weaker consumer demand” over the next year and cited macroeconomic challenges as a reason for the move. The downgrade also comes after a Bloomberg report on Wednesday showed that Apple told some suppliers to abandon plans to ramp up production for its new iPhone 14 after failing to see as high demand as anticipated. The broader market was also negative on Thursday, but Apple’s fall exceeded the S&P 500, which fell only 2.1% for the session.
9. The Fed’s Favorite Inflation Gauge Shows That Inflation Accelerated Faster than Expected in August
According to data released on Friday, the personal consumption expenditures price index excluding food and energy rose 0.6% for the month after being flat in July. That was faster than the 0.5% Dow Jones estimate. On a year-over-year basis, core PCE increased 4.9%, more than the 4.7% estimate and up from 4.7% the previous month. Including gas and energy, headline PCE increased 0.3% in August, compared with a decline of 0.1% in July. Personal income rose 0.3% in August, the same as July and in line with estimates. Spending rose 0.4% after declining 0.2% the month before, beating the 0.3% expectation. After-tax income increased just 0.1% after rising 0.5% the previous month, while inflation adjusted spending rose 0.1%. The inflation data reflected the shift in spending from goods back to services, which saw respective gains of 0.3% and 0.6% on the month. Food prices rose 0.8% while energy prices slid 5.5%. Fed Chair Lael Brainard stated: “rates will remain higher for some time” until inflation is brought under control.”
10. Russian President Vladimir Putin Declares “Four New Regions of Russia”
On Friday, Russian President Vladimir Putin declared four new regions of the country shortly after holding sham referendums in parts of occupied Ukraine. In a televised ceremony from the Kremlin in Moscow, Putin stated: “There are four new regions of Russia.” Putin continued on saying: “The results are known, well known,” when referring to the votes that Ukraine and Western governments say breached international law. He claimed the results were due to the will of millions of people, saying: “they had the right to self-determination.” The votes were seen as illegitimate by Ukraine and its allies. Putin also stated: “The West is looking for new opportunities to hit us and they always dreamt about breaking our state into smaller states who will be fighting against each other. They cannot be happy with this idea that there is this large country with all [these] natural riches and people who will never live under a foreign oppression.” Ukraine responded by saying: “the referendums were carried out under the barrel of a gun and called on its international allies to immediately ramp up severe sanctions on Russia in order to deter it from annexing more territory.” Kyiv stated: “it will not stop fighting until it has reclaimed every last inch of land lost to Russia and said it will not negotiate with the Kremlin following the so-called votes.”