Markets were hot coming into this week. Are temperatures starting to cool down?
Monday
S&P 500 0.44% | NASDAQ 0.70%
Markets entered rare air with new records through the close. The boost was attributed to NVIDIA’s (NVDA) investment in OpenAI. Gains were not broad but more focused on a select few tech companies.
Tuesday
S&P 500 0.55% | NASDAQ 0.95%
Markets fell on Tuesday as the Federal Reserve Chair, Powell, indicated that there is still an uncertain road ahead. A highly valued, or rich, equity environment has caught markets’ attention. Forward Price/earnings ratios have been elevated for some time, so those concerns are justified.
Wednesday
S&P 500 0.28% | NASDAQ 0.33%
The slide continued Wednesday as questions of a sustained rally swirled. New Home Sales rose in August while treasury yields, both short and long, rose as well.
Thursday
S&P 500 0.50% | NASDAQ 0.50%
Downward pressure for a 3rd straight day on equities revealed there was little appetite for risk-on assets. Growth stocks saw the biggest pullback, specifically in Mid-caps. Gross Domestic Product figures were revised higher for the 2nd quarter. Continued growth while the Federal Reserve cuts rates, means that inflationary increases remain a concern.
Friday
S&P 500 0.59% | NASDAQ 0.44%
Markets attempted a rebound after positive news of flat inflation data and a relatively small change in consumer sentiment. It was, however, not enough to prevent the week from ending in the red. Inflation data remains higher than targets and will continue to be watched each month, especially into the Holiday season.
Conclusion
S&P 500 0.31% | NASDAQ 0.65%
There was a shift in momentum in the opposite direction this week. Investors are weighing whether continued growth is a good thing, or bad, for the economy. The economy is driven by an efficient labor market (low unemployment), continued growth, and less inflationary pressure. The stock market may be valued higher than some are willing to pay at this stage of the economic cycle. The economy is still growing but too much growth can resemble an overheating machine. After consecutive days of all-time highs, this week proved it was time to cool things down a bit.
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