Author: Kerry Hilsabeck, CFP®
Title: Investment Adviser Rep
TAGS: S&P 500, Rate Cuts, Unemployment, Jobs, Manufacturing, Treasuries
This was another week of down markets. Will things get more turbulent or are we in the clear for now?
Monday S&P 500 .08% | NASDAQ .07%
With little to report for the start of the week, there was an overall sense of quiet to lead off trading. The Federal Reserve Bank (FRB) will begin its highly anticipated two-day meeting on Wednesday as all eyes focus on their verbiage on the timing and amount of rate cuts through the end of the year.
Tuesday S&P 500 -.50% | NASDAQ -1.28%
Earnings continue to be top of mind this week, particularly in the tech sector. Selling activity picked up in anticipation of that information as investors continued to pull profits on Tuesday from highly appreciated “Magnificent 7” Stocks.
Wednesday S&P 500 1.58% | NASDAQ 2.64%
The FRB held steady on interest rates after their two-day meeting concluded. Markets responded in the positive to confirm the prevailing sentiment. The committee indicated that a September Rate cut is “now on the table”. Part of their dual mandate of keeping inflation and keeping the labor market in check will be tested on Friday with the release of the jobs data.
Thursday S&P 500 -1.37% | NASDAQ -2.30%
The major indexes rose early but fell through the close, never regaining a footing. ISM Manufacturing (PMI)(Jul) indicated slowing and continued into contraction territory for the 4th straight month. Slowing manufacturing trends and a disappointing earnings miss from Amazon led to a selloff through the end of trading.
Friday S&P 500 -1.84% | NASDAQ -2.43%
Markets opened with the release of jobs data, and it wasn’t pretty. Nonfarm Payrolls (Jul) only added 114k jobs which was well below estimates and the lowest monthly figures added since January 2021. The unemployment rate rose to 4.3% from 4.1%; however, this is still in historically low territory. The 2 yr Treasury and 10 yr treasury plummeted with the anticipation of a .25% rate cut in September (falling to 3.88 and 3.80 respectively). This is also representative of a slowing economy and looming rate cut.
Conclusion S&P 500 -2.05% | NASDAQ -3.3%
The past 3 weeks have resulted in week-over-week market declines with the S&P500 shedding -4.8% and the NASDAQ falling -9% over that same period. Growth stocks typically experience turbulence as changes in monetary policy approach and these past few weeks are no exception. As some investors pull profits and move to safety, there may be reason for optimism as market valuations come “back down to earth” in a slowing growth environment. As always, it is important to maintain a diversified approach to investing and the recent equity slump represents the value of not maintaining an over-concentration in specific areas of the market. If a soft-landing does occur, markets could be headed north but it may be too early to tell.
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