Market Synopsis: Stocks Higher, Treasury Yields Mixed, Commodities Higher, Dollar Higher, Crypto Lower
Past Week Events:
This Week's Events:
U.S. Private Sector Sees Modest Job Growth in August
The U.S. private sector reported an addition of 177,000 jobs in August, marking the lowest monthly increase since March 2022. This subdued growth underscores the challenges faced by businesses in hiring amid a complex economic landscape. A decrease in corporate hiring was the primary factor that led to a lower than expected jobs growth. Hospitality and leisure which had been excellent growth drivers during the pandemic are beginning to slow. The data suggests that while the labor market continues to recover, the pace of recovery has decelerated, prompting concerns about overall economic momentum.
PCE Inflation Data Indicates Moderate Price Increases in July
The Personal Consumption Expenditures (PCE) index, a key measure of inflation, showed a moderate rise in consumer prices for July. While the inflation rate remains elevated, the data suggests that the rapid price increases witnessed in previous months might be stabilizing. Policymakers and economists closely monitor the PCE index, as it provides insights into consumer spending patterns and the broader economic climate. The current figures indicate that while inflationary pressures persist, there might be signs of easing, offering a mixed picture of the U.S. economic health.
Next Week:
The S&P final Services PMI for the month will be reported next week. This indicates the United States’ productivity in the service sector. The services flash was at 51.0 last month, which was down from 52.6 from the previous month. The market will be keen on whether this index follows a downward trend or whether it is able to stay above the positive 50.0 mark.
A long series of Fed presidents will be speaking this next week, particularly on Thursday. The market will see Fed presidents from Philadelphia, Chicago, New York, Atlanta, Dallas, and New York. They will be speaking on current market controversies including interest rates and more specific conflicts within their regions.
Market Snapshot:
This week, the financial landscape was characterized by a mix of inflationary pressures, a less-than-optimistic employment scene, and a dip in overall market sentiment. The prevailing conditions seemed to be hinting more and more towards a stagflationary environment.
Traders showcased a dovish trend in their prediction of future rates, acting as a cushion for equities throughout the week. Even with a dip following the jobs, the dovish outlook facilitated notable gains for the Nasdaq and Small Caps, marking a highlight since March. From a sectoral perspective, while Tech, Materials, and Energy emerged as frontrunners, Staples and Utilities lagged behind. Bond markets experienced volatility, with Treasury yields spiking post the payroll announcement, altering the week's trajectory. This resulted in longer-term yields pushing upwards. The dollar, amidst the market's oscillations, wrapped up the week with a slight uptick, reverting to levels observed earlier in the week. Cryptocurrencies, however, faced turbulence, with Bitcoin sliding below the $26,000 benchmark. Commodities saw Energy, especially Natural Gas, taking the lead. Silver remained unchanged, while Gold experienced a modest rise. Oil marked a significant weekly ascent, approaching a high not witnessed since the previous year.
Quip of the Week:"In the stock market, the most important organ is the stomach. It's not the brain." - Peter Lynch
U.S Equities:
Indexes(Week)
SPX 4,515.77(2.50%), DJIA 34,837.71(1.43%),
NASDAQ 14,031.81(3.25%), RUT 1,920.83(3.63%)
Sectors:
The market demonstrated a common optimism amongst upcoming interest rate decisions, providing a more dovish forecast. This allowed sectors heavily influenced by interest rate decisions to rally, with Tech, Consumer Discretionary, and Energy all finishing at the top of the ladder this week. Tech finished at the very top this week, with individual stocks within this sector beating Earnings expectations. Dell saw a 21% increase this past week as they beat expectations. Energy also saw a particularly great week because of OPEC production cuts, as the market is responding to their production cuts sending oil prices through the roof.
Treasuries:
Treasury yields were subjected to significant volatility this week. Yields trended lower throughout the week. Dovish expectations in terms of future rate expectations by traders catalyzed the decrease in yields with shorter term yields falling farther. However, with the release of jobs data on Friday yields spiked dramatically. Payroll data came in stronger than expected which in turn sent rate expectations higher and ultimately yielded up.
Commodities:
Oil
OPEC Production Cuts Boost Oil Price Forecasts Amid China's Economic Concerns
Despite the economic uncertainties looming in China, oil price forecasts have been revised upwards, largely due to OPEC's manufacturing cuts. The Organization of the Petroleum Exporting Countries (OPEC) has been implementing strategic production reductions, which can be expected to offset the decrease in demand from China's financial slowdown. These proactive measures by OPEC aim to stabilize the global oil market and ensure price resilience. The upward revision in oil price predictions highlights the influential role of OPEC in shaping global oil market dynamics, even in the face of significant economic headwinds.
Gold
The jobs data from this past week indicating a cooling economy gave investors a reason to believe interest rate pauses or cuts may be on the way soon. This sent gold up, which is due to gold and interest rate’s inverse relationship. As interest rates go down, gold goes up because it is a non-yielding asset, making its opportunity cost higher. Optimism regarding interest rates is a good sign for gold.
Crypto:
BTC -25,794, -1.17% ETH - 1,629, -1.37%
BTC Graph (5-day)
The price of Bitcoin dropped below $26,000, bringing down the majority of the top 10 cryptocurrencies with it. Market worries resulted from the U.S. Securities and Exchange Commission (SEC) announcing a delay in decisions on the Bitcoin ETF applications until October. The hype around these ETFs is palpable, and despite this trivial setback Grayscale Investments' victory in its legal battle with the SEC has given rise to optimism for future ETF approvals.
Europe:
Stoxx 600- 458.13, 1.49% DAX- 15,840, 1.33% FTSE 100 -7,464, 1.72%
DAX Chart (5-day)
With a high number of Western countries imposing sanctions on the Russian economy following their invasion on Ukraine, they “froze more than $300 billion of Russian Central Bank Assets held abroad” (Reuters). Russia is not being lenient about this matter, as they state that they will not let these foreign entities run easily.
Asia:
XJO (Australia)-7,278, 2.29% Shanghai 180 Index-8,102, 1.76% Nikkei 225- 32,710, 3.44%
XJO Chart (5-day)
Comments