Weekly Market Watch

Turning Back the Stocks

Global equities pulled back last week, with the S&P 500^® posting its first weekly decline in a month. Valuation concerns weighed on technology and artificial intelligence (AI)-related equities, which underperformed. Meanwhile, the U.S. government shutdown stretched to become the longest on record, and private sector data indicated a spike in layoff announcements that contributed to investor caution. Most major bond indices were slightly positive, providing a ballast as U.S. Treasury yields dipped amid the risk-off sentiment.

Market Outlook

The past week illustrates the challenge investors face when interpreting alternative economic data sources in lieu of the government payroll report that was missed given the shutdown. We anticipate additional pressure on lawmakers to reopen the government as the strain from missed economic reports, uncertainty regarding Supplemental Nutrition Assistance Program payments and travel disruptions impacts consumer confidence and spending. Any softening of the labor market should keep the Federal Reserve on the path to additional rate cuts, but we do not expect weakness to a degree that would derail the current solid economic trajectory.

Table of the Week

As third-quarter earnings season nears its end, the blended growth rate for the S&P 500 stands at a strong 13.1%, well above the initial 8.0% estimate.

This marks the 10th consecutive quarter of year-over-year growth and the fourth consecutive quarter of double-digit expansion.

All sectors, except Communication Services, have surpassed the initial estimates for the quarter. The growth differential between the overall index and the index, excluding the Mag. 7, has continued to narrow compared to previous quarters, suggesting a solid broadening of growth among other sectors.

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For definitions of indexes used in this publication, please refer to pnc.com/indexdefinitions.

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