Oil Climbs, iPhone Faces China Ban, UAW Strike Looms: The Week In The Markets

The week began with a surge in oil prices, as WTI crude reached over $85 per barrel, its highest level in 10 months. Saudi Arabia and Russia jointly decided to extend production cuts by 1.3 million barrels per day until the end of 2023, sparking concerns among analysts and economists about fresh inflationary pressures and prolonged higher interest rates from the Federal Reserve.

Resilient US Economy Bolsters Interest Rate Prospects: The U.S. economy demonstrated resilience as the ISM Services PMI for August exceeded expectations, marking the strongest service sector expansion in six months. 

Both the U.S. Dollar and Treasury yields rose further this week as investors revised their forecasts regarding the Federal Reserve’s interest rate stance. While a rate pause in September appears a done deal, there is approximately a 42% probability, as indicated by Fed futures, of another rate increase occurring in November.

Remarkably, the U.S. Dollar Index surged past 105 levels, the highest since early March 2023, notching its eighth consecutive week of gains, its longest winning streak since 2014.

Tensions Escalate In Auto Sector: The United Auto Workers is engaged in contract negotiations with Ford Motor Company F , General Motors Company GM and Stellantis N.V. STLA. With existing labor agreements expiring at midnight Thursday, there’s growing concern over a potential strike involving 146,000 members, as highlighted by UAW President Shawn Fain‘s criticism of General Motors’ wage increase proposal.

SEC Investigates Ryan Cohen: Renowned Canadian entrepreneur and GameStop Corp. GME CEO Ryan Cohen finds himself under scrutiny by the Securities and Exchange Commission for his stock trades related to the home furnishings retailer Bed Bath & Beyond, according to a Wall Street Journal report. 

Stock Market Performance: Sentiment remained broadly subdued, partly due to renewed geopolitical concerns between the United States and China regarding national security interests in critical technological products. 

Apple Inc. AAPL saw its market value plummet by nearly $200 billion over two days following reports that China intends to forbid public workers from using iPhones and other foreign-branded devices.

U.S. semiconductor stocks weakened amid concerns over new export restrictions on China, with NVIDIA Corp. NVDA experiencing its first weekly loss in three weeks. QUALCOMM Inc. QCOM fell over 8% for the week, marking the largest weekly loss in a year.

Tech’s weaker performance led to a 1.6% decline in the S&P 500 and a 2.6% decline in the Nasdaq 100 Index for the week. Blue-chip stocks on the Dow Jones fell 0.9%, while small caps in the Russell 2000 tumbled 3%.

In contrast, the energy sector continued to excel, with Marathon Petroleum Corp MPC and Valero Energy VLO among the top-performing S&P 500 stocks for the week.

Airbnb, Inc. ABNB posted high single-digit gains for the week, the most among Nasdaq 100 components, after company’s inclusion in the S&P 500.

Industrials and utilities lagged due to rising energy prices, and solar stocks struggled with increased long-term Treasury yields.

Chart Of The Week: Tech Stocks Reach Dot-Com-Bubble-Era Peaks Vs. Small Caps

What To Watch In The Week Ahead: Investors await the August consumer price index inflation report Wednesday, with economists projecting an increase in the annual inflation rate from 3.2% to 3.6%. Other key economic data includes the Producer Price Index report and retail sales figures on Thursday, as well as the Michigan Consumer Sentiment data Friday.

Oracle is scheduled to release its earnings report on Monday, while Adobe Inc ADBE, Copart, Inc. CPRT and Lennar Corp LEN report Thursday. 

Read now: August CPI Preview: Investors Brace For Inflation Uptick, Headache Looms For Powell

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