The major stock market averages closed nicely higher on Friday, (with the Dow rising over 375 points and the NASDAQ up over 2%), adding to overall weekly gains. The Dow Jones Industrial Average rose 2.7% to 32,152 – the Standard & Poor’s 500 Index added 3.6% to 4,067 – and the NASDAQ Composite jumped 4.1% to 12,112. With these weekly advances, the indices all snapped a three-week losing streak.
Financial markets remain volatile of late, as investors grapple with rising interest rates and tightening monetary policy by the Federal Reserve. Fed officials have consistently reiterated their hawkish sentiment, with Chair Powell repeating last week that he is “strongly committed” to bringing down inflation. Current market expectations are the Fed will raise rates ¾ percent at their policy meeting later this month. The CME FedWatch Tool now indicates a 90% probability for that ¾ point hike (up from a 57% chance one week ago).
Related to Fed policy, market focus will be on August’s inflation data being released this week. The Bureau of Labor Statistics is scheduled to release the Consumer Price Index on Tuesday and the Producer Price Index on Wednesday, where expectations are for year-over-year increases of 8.1% and 8.9% respectively. Any positive surprises on the inflation numbers would be welcome news to both Main Street and Wall Street, leading many investors to believe the Federal Reserve may not have to be as aggressive in raising rates.
We continue to expect more outsized volatility in the markets. Items including the inflation situation, interest rate increases, forecasts for future corporate earnings, and uncertainty around recession status all continue to be primary and shifting forces behind market action. Remember, don’t let short-term market volatility take you off the long-term financial plan that is right for you. As always, don’t hesitate to reach out to us with any questions you may have or if you would like to set up a meeting.
All the best – Southport Station Financial Management, LLC