Market Summary – August 7, 2023

Last Week’s Summary

  • S&P 500 Index fell 2.26%
  • International Equities fell 2.38%
  • Emerging Markets fell 2.36%
  • U.S. 10-Year Treasury Yield rose to 4.05%
  • Initial Jobless Claims rose to 227k
  • Change in Nonfarm Payrolls fell to 187k
  • Unemployment Rate fell to 3.5%

What to Watch for This Week

  • M, 8/7/23 Consumer Credit
  • T, 8/8/23 Trade Balance
  • W, 8/9/23 ADP Employment Change
  • Th, 8/10/23 Initial Jobless Claims, Consumer Price Index
  • F, 8/11/23 PPI, PPI Core, U. of Mich. Sentiment

Weekly Market Recap

U.S. equities experienced a notable decline last week, with the S&P 500 Index dropping 2.26%, marking its most severe weekly downturn since March earlier this year. The market volatility was driven by a significant event as the rating agency Fitch downgraded the United States credit rating, causing a worrisome shock to investors. This marked the second time a major rating agency downgraded the United States, with Standard and Poor having done so in 2011.

Following the downgrade, markets saw significant movements in longer-dated treasuries, with the U.S. 10-Year Treasury Yield rising back above 4%. Additionally, jobs data contributed to the risk-off sentiment as recent figures showed that the labor market remained resilient despite the Federal Reserve’s aggressive rate-hiking policy. The unemployment rate declined back to 3.5%, reaffirming a tight job market.

However, the report also indicated that the economy added fewer than 200k jobs this month, falling below economists’ estimates, raising questions about the pace of economic growth. While the job market showed resilience, signs of economic softening emerged as corporate earnings appeared weaker than expected. Looking ahead, traders are eagerly anticipating updates on inflation data, as two popular gauges for inflation, the Consumer Price Index and the Producer Price Index, both report this week.

These data releases will offer valuable indications and clarity on the Federal Reserve’s potential path forward in their next meeting scheduled for September. Internationally, equities also experienced a decline of 2.38%, reflecting the broad-based concerns impacting global markets. Furthermore, the Bank of England took action by raising interest rates by 25 basis points to 5.25% in response to the surging inflationary pressures.

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