The three major stock market indices all posted modest losses last week. The Dow Jones Industrial Average dipped about .1% to 34,584.88 – its third consecutive losing week. The tech-heavy NASDAQ Composite declined .5% to 15,043.97 and the Standard & Poor’s 500 Index fell .6% to 4,432.99 (its second consecutive weekly decline). The market is also opening lower this morning, with the Dow currently down over 500 points, in part on news that a large Chinese property development company may be at risk of default.
We believe the major factors worrying investors are the resurgence in COVID-19 cases, along with the possibility/likelihood the Federal Reserve is close to reducing some of its monetary stimulus. The Fed holds its highly anticipated two-day policy meeting this week, which concludes Wednesday afternoon with a press conference by Fed Chair Jerome Powell.
The consensus belief seems to be that the Federal Reserve will set the stage for tapering (reducing their $120 billion per month of asset purchases – possibly this year), with an actual announcement coming at their November meeting. The market is in NO way expecting an interest rate increase. Chair Powell has recently separated tapering from the eventual increase in interest rates.
Also in the week ahead are a handful of notable earnings reports scheduled to be released. Companies reporting include AutoZone, FedEx, General Mills, Nike, Darden Restaurants, and Costco Wholesale – so we’ll get a diverse batch of company reports to analyze and gauge how the stocks react to the numbers.
Economic data due out this week includes August figures on Housing Starts, Existing Home Sales, New Home Sales, and Leading Indicators. Again though, we expect the Federal Reserve and its commentary/policy statement will be the focal point this week (and beyond).
All the best – Southport Station Financial Management, LLC