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 US Large Caps Versus International Markets and US Small Caps & Dow Jones Utilities Average (DUX.I) 

September, historically the weakest month of the year for equities, has arrived with US investors still in a good mood following last week’s comments from Fed Chair Powell who didn’t say anything in his big Jackson Hole speech about tapering stimulus leaving investors to assume that the easy money party may continue for a while yet.

Mixed signals on US inflation in recent days (Core PCE inflation high, ISM prices paid below expectations) and yesterday’s soft ADP payrolls report may also be seen as taking some of the pressure off the Fed to make a move at least for a few weeks. This Friday’s US nonfarm payrolls report and next Friday’s US consumer and producer price inflation reports may confirm or change this assessment.

In commodity action, the disruptions caused by Hurricane Ida and continuing hot weather have boosted natural gas prices (and oil to a lesser extent). Natural gas may remain choppy between moving into shoulder season for temperatures but remaining in storm season. Meanwhile, other commodities such as grains and lumber have been struggling, adding to the case for moderating inflation.

The upcoming Labor Day long weekend in North America brings to a close the summer holiday and driving season. Next week the economic and earnings calendars are light but it’s a big week for central bank meetings with the Reserve Bank of Australia on Tuesday, the Bank of Canada on Wednesday and the European Central Bank of Thursday. Of the three, the ECB may attract the most attention from investors looking for hints of whether the central bank is planning to start tapering its asset purchases later this year.

In this issue of Equity Leaders Weekly, we look at breadth and concentration issues in the current US market rally and at what gains in the US utilities sector is telling us about investor sentiment.

US Large Caps Versus International Markets and US Small Caps

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