Equities ended the week lower, weighed down by losses from economically-sensitive companies as global growth concerns mount due to Covid-19 infections. Renewed lockdowns in China and other foreign countries could stretch supply chains already under pressure. In addition, continued high inflation readings and the Federal Reserve signaling they could soon begin to taper led to a risk-off sentiment. Retail sales for July fell by 1.1% due to a rise in cases from the Delta variant and waning fiscal support. While economic datapoints are likely to remain choppy in the near-term due to inventory, supply chain and labor shortages.
Longer dated Treasury yields fell last week as the August 18, the Federal Reserve Board and FOMC July 27-28 minutes were released. They discussed economic progress in light of COVID and noted that impacted sectors are improved but not yet fully recovered. They commented that “Inflation has risen, largely reflecting transitory factors.” The Board feels that financial conditions remain accommodative and intends to continue pursuing accommodative policy until inflation moderately above 2 percent has been experienced such that inflation averaged 2 percent over time. It does insist that inflation “expectations remain well anchored at 2 percent.” It was with such considerations that it left key rates unchanged. Regarding asset purchases the Committee discussed that it currently purchases $80 billion/month of Treasury securities and $40 billion/month of agency mortgage-backed securities. Since the December increase to the above rate, the Committee has observed that “the economy has made progress towards these goals (inflation and employment), and the Committee will continue to assess progress in coming meetings.”