iShares S&P/TSX Capped Energy ETF (XEG.TO) & Dow Jones Utilities Average (DUX.I) 

The trading bounce which capped off August has faded into the start of September, historically the seasonally weakest and most volatile month of the year for stocks. With investors returning from summer vacation and responding to last week’s stronger than expected US Nonfarm Payrolls and US Construction Spending reports, equity markets have started to backslide again this week. 

Between indications of a robust North American economy and energy prices continuing to rise with Russia and Saudi Arabia extending their supply cuts through to the end of the year, inflation and interest rates remain a concern for investors, impacting interest sensitive groups such as Utilities, Financials and Real Estate in particular. In late August, Fed Chair Powell left the door open to more interest rate hikes, and the 10-year US Treasury Note Yield has climbed toward 4.35%. So far this week, the Bank of Canada and the Reserve Bank of Australia have held their benchmark rates steady.   

A number of significant economic announcements are due over the next ten days which may give an indication of how much pressure the Fed is under to raise the Fed Funds rate again when it meets later this month. Headline numbers include US Consumer Prices on Wednesday, US Producer Prices, Retail Sales and an ECB meeting Thursday, and US industrial production next Friday.   

In this edition of Equity Leaders Weekly, we look at the impact of rising energy prices and hawkish talk in interest rates have had on the Energy and Utilities sectors.