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 Sector Scopes Monthly Review & Dow Jones Transportation Average (DTX.I) 

Stock markets around the world have continued to struggle over the last week, as investors continue to struggle with the prospects of a stagflation environment. Much weaker than expected US nonfarm payroll growth and more comments from companies about supply chain struggles added to the case for slower economic growth.

Meanwhile, higher than expected US wage growth and consumer price increases added to the case for rising inflation and increasing pressure on the Fed to start tapering back asset purchases this year and on central banks in general to potentially more toward rate hikes sooner than previously planned, perhaps sometime next year. Interestingly, gold, a traditional inflation hedge, picked up steam yesterday on signs of increasing inflation pressures in the US, but not enough to break out of its current range.

Earnings season kicks off with results from several senior US banks, and other financial firms. Initial results were positive although managements did express that supply chain difficulties, COVID delta wave and increasing energy costs were issues that they had to manage through. Next week, the spotlight moves over to the Transportation sector, particularly railroads on both sides of the border, and US airlines, which may give investors a better indication of how serious the supply chain problems are and whether they can be mitigated quickly or not. Reporting also expands into a number of other sectors including Consumer Products, Technology and Industrials with a particular focus on big caps with 8 of the 30 Dow companies set to report over the next ten days.

Economic numbers continue to roll out over the next few days which may continue to be viewed through the stagflation lens as the November 2nd Fed decision on whether and when to taper approaches. US producer prices today and house prices next week may give more color

on inflation, while US retail sales on Friday, US housing starts and industrial production next week, plus Chinese GDP and retail sales due over the weekend may give more color

on economic growth prospects.

In this issue of Equity Leaders Weekly, we take our monthly look at what the Sector Scopes are telling us about the market and at key levels for the transportation sector heading into a key week for earnings from the group.

Sector Scopes Monthly Review

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