Market Synopsis: Stocks Mixed, Treasury Yields Mixed, Commodities Mixed, Dollar Up, Crypto Mixed
Past Week Events:
This Week's Events:
According to recent S&P surveys economy is showing signs of slowing down
Recent surveys by the S&P rating agency show that the U.S. economy is declining. The data shows that while some sectors remain strong, others like health care, retail and hospitality, are showing signs of slowing down. This mixed economic picture has raised concerns among analysts and policymakers about the sustainability of the current growth trajectory. The downturn is evident across industries, and studies have emphasized the need for nuanced understandings of economic conditions. The S&P manufacturing and service surveys, however, have in the past shown the economy to be weaker than other indicators.
Powell Expresses Uncertainty on Further Tightening Measures
Federal Reserve Chairman Jerome Powell has expressed reservations about the need for additional tightening of fiscal policy. In his latest statements at Jackson Hole, Powell emphasized the uncertainty surrounding the economic outlook and the challenges in making definitive changes to rates. While the Fed has taken steps to address inflation and different economic issues, Powell's comments propose a continued cautious approach going forward. Powell explained that policy decisions may be stimulated by means of a variety of factors. Powell's remarks underscore the Fed's dedication to a flexible and responsive monetary coverage framework. Essentially, the end result was highly inconclusive.
Next Week:
The S&P Global Manufacturing and Services PMI Flashes for the month will be reported. These are excellent indicators of the United States’ productivity in the manufacturing and service sectors. Last month’s services PMI was at 52.3, indicating growth in the services industries. The Manufacturing PMI was still below 50 at 49.0 last month, indicating a possible contraction in the manufacturing sectors. These indicators have stayed pretty steady these past few months, so time will tell whether there is a change.
The UMich consumer sentiment index is a survey that asks how people feel about their financial situation, their spending habits, and the economy in general. The last report came in at 71.2%, and analysts forecast this to stay exactly the same.
Market Snapshot:
This week, the financial markets were influenced by a blend of macroeconomic data and central bank commentary. On the macro front, the week was driven by disappointing data. S&P surveys painted a picture of slowing growth. NVIDIA, a tech giant, surged after earnings but soon lost its momentum, ending over 10% down from its highs. Federal Reserve Chair, Jerome Powell's address was a focal point this week. His speech, perceived as hawkish, essentially conveyed that the Fed is prepared to hike rates if necessary but will hold back if conditions don't warrant it. Despite the underwhelming info he gave, anticipation of Powell's speech and his actual address sent hawkish signals through short-term rate expectations. There's now a 25% chance of a rate hike in September and a 45% probability in November. On the bond front, Treasuries were mixed this week. The 2Y Yield surged back above 5.00%, rising to the July highs before modestly reversing. In the equities market, the Nasdaq and the S&P outperformed, while the Dow ended the week lower. The dollar ended the week slightly higher. Both Bitcoin and Ethereum remained almost flat, with Bitcoin hovering around the $26,000 mark. In the commodities market, Gold managed to stay above $1900, even after a post-Powell drop. Oil prices experienced fluctuations, influenced by Powell's speech and potential US-Iran deal news, but managed to get back above $80 by the week's close.
Quip of the Week: "It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." - George Soros
U.S Equities:
Indexes(Week)
SPX 4,405.71(0.82%), DJIA 34,346.90(-0.45%),
NASDAQ 13,590.65(2.26%), RUT 1,853.63(-0.31%)
Sectors:
The market performed generally positively this past week, with technology leading the positive end of the sectors and energy being the worst-performing sector this past week. The strong performance of tech can be attributed to Alibaba’s development of AI technology, strong NVIDIA earnings, and an explosion from fintech company Affirm, as the company saw a 28% increase in its shares.
Treasuries:
Treasury yields were subjected to significant volatility this week. Yields dropped significantly on Wednesday with longer period yields underperforming. However, the shorter end of the spectrum reversed much of their decline with Powell’s speech at Jackson Hole. Only the 10 year and 30 year yields closed the week lower. The 2 year outperformed the post, steepening the yield curve even further again.
Commodities:
Oil
Market Anticipates Sanctions-Easing Deal with Iran
The worldwide market is increasingly more positive about the opportunity of an agreement that would ease sanctions on Iran. This sentiment stems from ongoing negotiations and diplomatic efforts geared toward reviving the 2015 nuclear deal. If sanctions are lifted, Iran could significantly grow its oil exports, introducing more supply into the global market. Such an increase in demand has the ability to greatly affect international oil prices. However, the precise impact remains uncertain, as it might depend upon different factors, consisting of the pace at which Iran can ramp up production and the global demand situation at that time. Overall though it comes down to a simple question of supply and demand.
Gold
Gold had a very strong start to the week, looking to break a long streak of losses. Fed Chairmen Powell’s speech had a temporary impact on gold, as he hinted towards a hawkish monetary stance meaning that rate hikes are still very likely in the future. Interest rates and gold have an inverse relationship, so this set back gold, but gold bounced right back ending the week positive.
Crypto:
BTC -26,067, -0.22% ETH - 1,653, -0.79%
BTC Graph (5-day)
Last week, news of Elon Musk’s SpaceX corporation selling all of their cryptocurrency holdings caused Bitcoin to plummet. Despite having another negative week, there remains optimism for Bitcoin holders, as JP Morgan analysts find that in the near future, Bitcoin has a small downside and a much larger upside.
Europe:
Stoxx 600- 451.39, -0.66% DAX- 15,631, 0.37% FTSE 100 -7,338, 1.05%
DAX Chart (5-day)
After a meeting in Jackson Hole, ECB president Christine Lagarde and Federal Reserve Chairman Jerome Powell reinstated both banks’ commitment to achieving the goal of 2% inflation. Many thought rate pauses or cuts may be coming soon, but hope for this is delayed after this meeting.
Asia:
XJO (Australia)-7,115, -0.46% Shanghai 180 Index-7,962, -1.55% Nikkei 225- 31,624, 0.55%
XJO Chart (5-day)
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