Week 34 in Brief
Stocks in the US fell on Friday following Fed Reserve Chair Jerome Powell’s speech that the central bank won’t back off in its fight against rapid inflation. All major US indices fell by more than 3% on Friday, to end a concurrent second week in losses. The fall also marked the biggest one-day fall since mid-June. Stocks in the region only saw an upside on Wednesday and Thursday as Crude oil futures continued to gain after Saudi Arabia suggested the OPEC+ alliance may make possible cuts to production.
How did the major indices perform?
- The S&P 500 (.SPX) lost 141.46 points, or 3.37%, to end at 4,057.66 points,
- The Nasdaq Composite (.IXIC) lost 497.56 points, or 3.94%, to 12,141.71.
- The Dow Jones Industrial Average (.DJI) fell 1,008.38 points, or 3.03%, to 32,283.40.
For the week:
- The S&P 500 fell 4%.
- The Nasdaq slid 4.4%
- The Dow lost 4.2%
What drove the U.S. market?
- The biggest market mover in the US was investors’ expectations of aggressive interest rate hikes and a slowing economy, with the fed chair confirming the central bank would slow down in hiking interest rates.
- Data on the labor market also indicated continued strength, which further makes a case for a more tempered pace of hikes.
- Stocks fell on both Monday and Tuesday, with stocks in Communication Services and Health Care taking the biggest hits. The energy sector gained the most.
- Stocks went on to have a two-day rally, as materials, communication services, and IT outperformed, while Consumer staples underperformed the broader market index.
- Peleton released their earnings this week with the earning season almost over. Shares of the company tanked 21% after it reported wider-than-expected losses.
- Snowflake’s share price increased 24% after beating quarterly estimates.
How did the European markets perform?
- Up until Friday afternoon before the hawkish speech at the Jackson Hole central banking conference, shares in Europe we in the green. Indices in the region swung into losses following the speech.
- The FTSE 100 ended the day down 52.43 points, or 0.7%, at 7,427.31
- Pan-European Stoxx 600 provisionally ended Friday down 1.7% following the comments at the central bank’s Jackson Hole economic symposium. All sectors turned red in afternoon trade, with retail and travel and leisure stocks sliding the most, down 3.5% and 3.4%, respectively.
- The German Dax decreased 2.26% by the end of the session, while the French Cac dropped by 1.68%.
- Software firm Micro Focus gave the FTSE 250 a major boost after its shares rocketed following the agreement of a £5.1 billion takeover deal.
How did Asian markets perform?
- While most Asian equities slumped slightly following the Jackson Hole conference, most ended Friday with gains.
- The Asia Dow, which includes blue-chip companies in the region, was up by 14.2 points, or 0.43%, to 3,286.
- Tokyo’s Nikkei 225 stock exchange increased by 162.4 points, or 0.57%, to 28,641.
- The Hang Seng, the benchmark for blue-chip stocks trading on the Hong Kong stock exchange, posted the largest jump of 201.7 points, or 1.01%, to finish at 20,170.
- The Singapore index gained 1.7 points, or 0.05%, to close at 3,249, while India’s Sensex benchmark climbed by 156 points, or 0.27%, to end the day at a three-month high of 58,930.
- China’s Shanghai Stock Exchange was the only one to post a drop, losing 10 points, or 0.31%, to close at 3,236.
Bonds and Commodities
- On Friday, Two-year U.S. yields rose seven basis points to 3.466%, the highest since late 2007 and far above the ten-year at 3.10%. Yields have also climbed across Europe with double-digit gains in Italy, Spain, and Portugal.
- The rise of the dollar and yields has been a drag for gold, which was down at $1,725 an ounce.
- Oil prices swung higher on speculation that OPEC+ could cut output at a meeting on Sept 5.
- Brent rose 58 cents to $101.57, while U.S. crude firmed 87 cents to $93.93 per barrel.
- U.S. dollar shot to a fresh two-decade top of 109.40 against a basket of major currencies, breaching the previous high from July.
- The dollar gained 0.7% to a five-week peak on the yen at 138.58, with bulls looking to re-test its July top of 139.38.
- The euro was struggling at $0.9927, not far from last week’s two-decade trough of $0.99005.
- The sterling slipped to a 2-1/2-year low of $1.1656.
For this week, market watchers will be paying close attention to the U.S. labor market, in anticipation of the Bureau of Labor Statistics (BLS) August nonfarm payrolls report on Friday. Earlier in the week, the Job Openings and Labor Turnover Survey (JOLTS) report will provide the latest information on hires, quits, and separations for the month of July, while payroll services provider ADP will release its National Employment Report tracking growth in nonfarm private sector payrolls.