This Weekly Financial Markets Update reviews the top market headlines: Inflation Rate Eases Slightly in September, Fed Minutes Show Divide on Rates, Small Business Optimism Falls in September

Top Three Market Headlines

Inflation Rate Eases Slightly in September: The U.S. Department of Labor reported last week that the Consumer Price Index (CPI) rose 0.4% in September from the prior month, slightly less than the 0.6% rate recorded in August. On a year-over-year basis, the CPI increased 3.7% in September, identical to the pace exhibited in August. The largest contributors to the CPI's monthly rise in September were shelter and gasoline. The "core" CPI, which excludes volatile food and energy items, rose by 0.3% in September and was up 4.2% versus the prior year. While the latter was the slowest pace in two years, it remained above the Federal Reserve's 2.0% target.

Fed Minutes Show Divide on Rates: Minutes released last week of the September meeting of the Federal Reserve's policy-setting committee indicated members were split on whether another increase in the federal-funds rate before year-end would be warranted. At the meeting, the Fed held the benchmark fed-funds rate target range at 5.25% to 5.50%. One factor that may impact the Fed's path is the tightening of financial conditions resulting from the continued rise in market bond yields. A handful of Fed governors, for instance, made statements last week indicating that the recent surge in yields could thwart another rate hike.

Small Business Optimism Falls in September: The National Federation of Independent Business (NFIB) reported last week that its Small Business Optimism Index declined in September for the second consecutive month. The latest reading of 90.8 marked the 21st consecutive month the index fell below its historical average of 98. Nearly a quarter of small business owners reported that inflation was the biggest problem faced in running their business, while labor quality also remained a top concern. 43% of business owners reported that it was difficult to fill job openings; while this was down from 61% in June, it remains historically high.

As of October 16, 2020 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 0.70% 0.30% 10.39% 19.96%
S&P 500 0.47% 0.99% 14.19% 19.92%
Russell 2000 -1.47% -3.63% -1.18% 1.08%
MSCI EAFE 0.97% -0.90% 6.12% 25.25%
MSCI Emerging Markets -1.51% -0.12% 1.69% 14.30%
FTSE NAREIT 1.56% -0.28% -2.42% -4.29%
Bloomberg Commodity 2.75% 0.64% -2.83% -4.65%
Barclays U.S. Aggregate 0.95% -0.23% -1.43% -1.46%