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U.S. and U.K. See Financial Turbulence
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U.S. and U.K. See Financial Turbulence
Rising recession fears and uncertainty in the bond and currency markets sent stocks to new 2022 lows last week.
The Dow Jones Industrial Average declined 2.92%, while the Standard & Poor’s 500 slumped 2.91%. The Nasdaq Composite index fell 2.69%. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.94%.
A Tumultuous Week
U.S. stocks were under pressure all week due to recession concerns and unsettled trading in the bond and currency markets. This stress followed economic steps out of the U.K. During the previous week, the Bank of England (BOE) raised interest rates, and its prime minister announced unfunded tax cuts that the markets interpreted as inflationary.
U.S. bond yields rose early last week, sending stocks lower until Wednesday’s rally following news that the BOE would buy U.K. government bonds. U.S. stocks resumed their descent the following two days to close out a disappointing week, month, and third quarter.
The Bank of England Acts
Global bond and currency markets have been volatile recently due to…
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Fallout From Powell Comments Continues
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Fallout From Powell Comments Continues
Last week, Fed Chair Powell said the U.S. would not tame inflation without economic pain. This week heightened recession fears and sent stocks broadly lower.
The Dow Jones Industrial Average dropped 4.00%, while the Standard & Poor’s 500 lost 4.65%. The Nasdaq Composite index fell 5.07% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 3.05%.
Yields Surge, Stocks Tumble
Last week’s meeting of the Federal Open Market Committee (FOMC) proved unsettling for the financial markets. It wasn’t only the widely expected announcement of another rate hike but a more hawkish message that rates may be heading higher for longer than anticipated. Fed officials indicated that any policy change might be further off than investors had contemplated.
The latest rate hike caused bond yields to rise, with two-year and ten-year Treasury note yields touching levels not seen in over a decade. Global central banks moved in tandem with the Fed, as the Bank of England, Swiss National Bank, and Norway’s Norges Bank, among others, also hiked rates.
Another Rate Hike
In its effort to cool inflationary forces, the Federal Reserve raised interest rates by 0.75% last week—the third consecutive rate increase of that size. Projections by FOMC members suggested that…
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White Hot Inflation Report Alarms Investors
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White Hot Inflation Report Alarms Investors
A hotter-than-expected inflation report sent stocks sharply lower last week as investors faced the prospect of more aggressive interest rate hikes by the Federal Reserve for perhaps a longer period.
The Dow Jones Industrial Average fell 4.13%, while the Standard & Poor’s 500 lost 4.77%. The Nasdaq Composite index dropped 5.48% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dipped 1.78%.
Inflation Deflates Markets
Stocks suffered their worst day in more than two years last Tuesday as markets were caught off-guard by a higher-than-anticipated August inflation report.
Markets expected the August report to show a substantial cooling of inflation, potentially allowing the Fed to ease up on interest rate hikes. Instead, the elevated inflation number not only undercut those easing hopes but raised the possibility of a more significant rate hike. On Tuesday, traders assigned a 28% probability of a 100 basis point hike, from a 0% chance just the day before. Price action remained choppy for the remainder of the week, closing the week with additional losses as a global package-delivery company warned of a worldwide recession.
August CPI Disappoints
August’s Consumer Price Index (CPI) rose 8.3% from a year ago, showing a continued deceleration in…
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Markets Upbeat, Despite Gloomy Inflation Talk
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Markets Upbeat, Despite Gloomy Inflation Talk
In a holiday-shortened week of trading, stocks posted healthy gains despite more tough talk on monetary policy from Fed officials.
The Dow Jones Industrial Average rose 2.66%, while the Standard & Poor’s 500 gained 3.65%. The Nasdaq Composite index picked up 4.14% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.26%.
Stocks Rise
Stocks fell coming off the Labor Day weekend, dragged down by news that Russia was cutting off natural gas supplies to its European customers. Stocks also were under pressure due to a surprisingly strong report on business conditions, which heightened fears of continued Fed hawkishness.
Sentiment quickly improved as bond yields turned lower and oil prices fell. Investors reacted positively to comments by Fed Vice Chair Lael Brainard, who reiterated the Fed’s commitment to quashing inflation while acknowledging the risks of going too far. Stocks added to their gains on Thursday as the market digested another speech from Fed Chair Powell and a 0.75% hike by the European Central Bank. The markets surged on Friday amid little news, ending a positive week on an upbeat note.
No Inflation Walk Back
In his first public comments since his speech at Jackson Hole that sent markets into a tailspin, Fed Chair Powell did…
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Markets Sag, Job Numbers Soar
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Markets Sag, Job Numbers Soar
The overhang of Fed Chair Powell’s Jackson Hole speech the previous week carried over into last week as investors recalibrated stock valuations amid a seemingly more assertive monetary policy stance.
The Dow Jones Industrial Average fell 2.99%, while the Standard & Poor’s 500 stumbled 3.29%. The Nasdaq Composite index lost 4.21%. The MSCI EAFE index, which tracks developed overseas stock markets, slid 4.90%.
Stocks Extend Losses
Investors remained unnerved by the aggressive tone of Jerome Powell’s speech and subsequent comments from Fed officials suggesting a higher rate hike than the market expected at the Fed two-day meeting ending September 21. The probability of a 75 basis point hike in September rose to nearly 65%, up from just 28% a month ago.
Stocks moved steadily lower before finding some footing on Thursday. Friday’s employment report appeared to strike a “goldilocks” note (i.e., labor gains not so strong that it might trigger greater Fed hawkishness but robust enough to allay imminent recession fears). After early gains, stocks turned lower ahead of the holiday weekend.
Employment Shines
Employers added 315,000 jobs in August, maintaining the labor market’s remarkable resiliency amid a contracting economy. The unemployment rate rose to…
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Powell comments spur sell-off on Wall Street
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Powell comments spur sell-off on Wall Street
A comprehensive sell-off on Friday following comments by Fed Chair Jerome Powell drove stocks to losses for the week.
The Dow Jones Industrial Average tumbled 4.22%, while the Standard & Poor’s 500 dropped 4.04%. The Nasdaq Composite index fell 4.44% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.10%.
Under Pressure
Stocks dropped on Friday following Powell’s remarks reiterating the Fed’s inflation-fighting resolve. While his comments did not break new ground, markets reacted severely, perhaps on worries that interest rate hikes may continue into next year.
After starting the week sharply lower on renewed rising interest rates and economic slowdown fears, markets staged a modest turnaround beginning mid-week. Stocks rallied on Thursday, sparked by a revised Gross Domestic Product estimate showing the economy’s shrinking less than initially estimated. Thursday’s rally also got a boost from regional Federal Reserve Bank presidents, who suggested future rate hikes may be in line with market expectations.
Powell at Jackson Hole
In his much-anticipated speech at the Jackson Hole Economic Symposium, Powell unflinchingly reaffirmed the Fed’s commitment to…
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Markets Tap Brakes, But Hold Fast Against Downbeat News
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Markets Tap Brakes, But Hold Fast Against Downbeat News
Stocks tumbled on Friday, sending stocks to a weekly loss after an otherwise quiet August week of trading.
The Dow Jones Industrial Average slipped -0.16%, while the Standard & Poor’s 500 lost 1.21%. The Nasdaq Composite index declined 2.62% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 0.88%.
Summer Rally Hits Pause Button
The market rally that began in mid-June paused last week. Despite the week’s losses, stocks exhibited resiliency in the face of a string of troubling economic news that included flat retail sales, weak housing numbers, an inversion in the yield curve, and tepid economic data out of China.
Nevertheless, stocks tumbled on Friday amid hawkish comments about future rate hikes, rising bond yields, and ahead of the annual meeting of global central bankers in Jackson Hole, Wyoming, in which Fed Chair Jerome Powell is scheduled to speak on August 26th.
Expect More Rate Hikes
Minutes from July’s Federal Open Market Committee meeting indicated that additional rate hikes would be needed to help manage inflation. Fed officials did acknowledge that further rate hikes…
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Stocks Have Warmer Week as Inflation Cools
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Stocks Have Warmer Week as Inflation Cools
An improving inflation outlook buoyed investors’ spirits last week, helping lift stocks to solid gains.
The Dow Jones Industrial Average advanced 2.92%, while the Standard & Poor’s 500 rose 3.26%. The Nasdaq Composite index added 3.08% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 2.39%.
Lower Inflation Spurs Buying
Stock prices surged mid-week when the U.S. Bureau of Labor Statistics released a better-than-expected Consumer Price Index (CPI) number, with buying momentum building throughout the trading session.
Gains were significant across the board, with technology and small-cap companies leading the market higher. The mid-week rally sent the S&P 500 to its highest level since May and the Nasdaq to its highest level since April. Bond yields fell on expectations that the Fed’s pressure to hike rates further might ease. After pausing on Thursday, stocks again ripped higher on Friday, aided, in part, by a report indicating improving consumer sentiment.
Inflation Cools
The Consumer Price Index in July was softer than expected, with prices unchanged from the previous month thanks to a 4.6% decline in energy prices and a 7.7% drop in gasoline. Despite the encouraging results, the CPI report still evidenced…
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Mixed Week For Markets, Jobs On The Rise
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Mixed Week For Markets, Jobs On The Rise
Stocks turned in a mixed performance last week as investors struggled with headlines suggesting that the Fed was unlikely to soon ease up on its current monetary tightening policy.
The Dow Jones Industrial Average slipped 0.13%, while the Standard & Poor’s 500 rose 0.36%. The Nasdaq Composite index picked up 2.15% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.23%.
Showing Resilience
Ahead of Friday’s employment report, stocks were generally higher, highlighted by a Wednesday rally triggered by fresh earnings surprises and a better-than-expected economic report. The rally was especially notable because it occurred when multiple Fed officials said that the fight against inflation hadn’t ended, perhaps throwing cold water on the idea that the Fed might pivot due to weakening economic activity and the prospect of cooling inflation.
Aside from this single day of enthusiasm, markets were a bit jittery, especially as investors monitored Speaker of the House Pelosi’s visit to Taiwan. A robust employment report on Friday reinforced the idea that the Fed would likely stay the course on monetary tightening, resulting in a mixed market for the week.
Employment Report
The U.S economy added 528,000 jobs in July, doubling the consensus expectation of 258,000. The unemployment rate ticked…
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Markets Rally; Earnings Better Than Expected
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Markets Rally; Earnings Better Than Expected
Undaunted by another Fed rate hike and news of a contracting economy, the stock market rallied last week on better-than-expected corporate earnings.
The Dow Jones Industrial Average increased 2.97%, while the Standard & Poor’s 500 picked up 4.26%. The Nasdaq Composite index gained 4.70% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.95%.
Stocks Rally on Earnings
It was an inauspicious start to the week after a big-box retailer missed earnings and reduced forward guidance on Tuesday, sparking a broad market retreat.
But sentiment improved following mega-cap technology company earnings that proved better than expected. Enthusiasm gathered steam in the wake of the Fed’s 0.75% rate hike, boosted by Fed Chair Powell’s comments following Wednesday’s Federal Open Market Committee meeting. Powell indicated that it might become appropriate to slow the pace of future hikes, and he didn’t believe the economy had entered into recession. Stocks on Thursday shrugged off news of a second-consecutive quarter of negative economic growth to build on Wednesday’s gains as fresh earnings continued to comfort, if not impress, investors.
Economy Contracts
The U.S. economy shrank at an annualized rate of 0.9% in the second quarter as consumers pulled back on spending and businesses worked to reduce inventories. It was the second-consecutive quarter of negative economic growth, meeting the technical definition of a recession. Unlike past recessions, hiring has been…