The major stock market averages all lost ground last week. The Dow Jones Industrial Average dropped 2.2% to 34,501. The Standard & Poor’s 500 Index declined for its third consecutive week, losing 2.1% to 4,370. The NASDAQ Composite, also in the midst of a three-week losing streak, fell 2.6% to 13,291. The tech heavy NASDAQ has now fallen approximately 7.3% this month.
Primary factors weighing on the stock market include some weak economic data out of China, higher interest rates (as the yield on the 10-year Treasury hit its highest level since 2007) and concerns the Federal Reserve may hike rates further, in their fight against inflation. Higher bond yields provide competition for stocks. Higher interest rates increase the relative attractiveness of bonds versus stocks, and higher rates also typically weigh on the economy and the stock market.
Looking to the week ahead, we’ll get a highly anticipated earnings report from NVIDIA, which has become a poster child for AI, after the closing bell on Wednesday. Financial markets, however, will be mostly focused on the happenings in Jackson Hole, Wyoming, and we are not talking about the conditions or outlook for fly fishing (although we hear there are some nice cutthroat trout being brought to hand on the Snake River). Rather, the main event in Jackson Hole this week is the Federal Reserve Bank of Kansas City’s Annual Economic Policy Symposium. Fed Chair Jerome Powell, in the main event at the gathering, will be speaking on Friday.
The minutes from the Fed’s July meeting suggested more rate hikes may be on the horizon. Most recently, some economic data, including retail sales, housing starts, and industrial production have come in strong – increasing inflation worries. Overall this month, the inflation/interest rate scenario has been a headwind for the stock market. We’ll see if we can catch an indication of future Fed policy from Chair Powell, whose commentary always has the potential to be market moving, in either direction.
Please contact us with any questions or if you would like to set up a meeting.
All the best – Southport Station Financial Management, LLC