To The Moon

The major U.S. stock indexes started and ended the week with steep daily declines, sending the $S&P 500(.SPX)$ , $NASDAQ(.IXIC)$, and the $DJIA(.DJI)$ down around 4% overall. It was the second weekly setback in a row for the $S&P 500(.SPX)$ , interrupting the positive momentum that had lifted the index more than 17% from mid-June to mid-August.

As of last Friday,$DJIA(.DJI)$ YTD is -10%, $NASDAQ(.IXIC)$ YTD is -22%, $S&P 500(.SPX)$ YTD is -4%. $S&P/ASX 200(XJO.AU)$ &$Straits Times Index(STI.SI)$ in YTD performance is -5.5% & 4.1% respectively.

With the U.S. dollar thriving, global stock indexes, currencies and commodities wailed last week. September is typically a falling month as fund managers tend to sell underperforming positions as the end of the Q3 approaches. The $S&P 500(.SPX)$ could drop more than 10% in September as investors price in the possibility that the Fed will not start cutting rates as soon as previously hoped, said Natixis chief portfolio strategist.

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Macro Factors:  

Hawkish Words: U.S. FED Chair Jerome Powell said the FED remains committed to extending its policy of aggressively raising interest rates, even at the risk of fueling a potential recession. Speaking in Jackson Hole, Wyoming, Powell directly countered money markets pricing in rate cuts starting in the second half of 2023. After this statement, the market's expectations for a 75 basis point rate hike by the Federal Reserve in September instantly surged to around 60%.

Inflation Cooldown: Inflation has recently decelerated. Consumer prices rose 6.3% in July from a year earlier, down from 6.8% in June, as measured by the personal consumption expenditures price index. Excluding volatile food and gas, prices rose 4.6%.

GDP Upward Revision: Although U.S. GDP has contracted for two quarters in a row, an updated estimate shows that the rate of decline was more modest than initially estimated. Thursday’s government revision put the contraction at an annual 0.6% rate in the second quarter, compared with an initial estimate of 0.9% that was released in late July.

Growth Style Lags: While both equity styles posted negative results for the week, growth stocks trailed their value counterparts by a wide margin. An index of U.S. growth stocks fell by about 4.6% while a value index retreated 3.2%, extending the value style’s year-to-date performance leadership.

Sectors Performances:

Except for the energy sector, which rose 4.36%, almost all sectors of the US stock market were wiped out.

Technology stocks became the hardest hit by the sell-off. Among them, the IT sector, where chip stocks such as $NVIDIA Corp(NVDA)$ are located, plunged 4.3%, and the communications sector, where $Alphabet(GOOG)$ is located, and the consumer discretionary sector, where $Amazon.com(AMZN)$ is located, both fell 3.9%.

Among the six major technology stocks in the US stock FAANMG, Google fell 5.4%, hitting a new low since July 26; Amazon fell nearly 4.8%, $Netflix(NFLX)$ fell nearly 4.6%, $Meta Platforms, Inc.(META)$ fell nearly 4.2%, $Microsoft(MSFT)$ fell nearly 3.9% , $Apple(AAPL)$ fell nearly 3.8%.

Weekly Top Gainners of S&P 500：

$Mosaic(MOS)$ , $CF Industries Holdings Inc(CF)$ ,$APA Corporation(APA)$ ,$Marathon(MRO)$ , $Hess(HES)$ , $Albemarle(ALB)$ , $Royal Caribbean Cruises(RCL)$ ,$ConocoPhillips(COP)$ , $Pioneer Natural Resources(PXD)$ , $Devon(DVN)$ .

Other Markets:

Yields impact: As FED said he expects to extend the policy of aggressively lifting interest rates. The yield of the 10-year U.S. Treasury bond climbed to around 3.07% in morning trading before settling to around 3.04% in the afternoon. It ended the previous week at 2.98%. 

Oil prices hit a more than three-week high, amid growing concerns over supply tensions amid potential output cuts by major producers, a sluggish restart of the Iran nuclear deal, disruptions to Russian exports and partial shutdowns of U.S. refineries.

Gold fell below $1725/oz. The dollar rose significantly again, hitting a 20-year high. Spot gold fell sharply in the short-term, and the price of gold just fell below $1,725 an ounce. Gold once again tested the 1720 support.

The Week Ahead: August 29-September 2

A monthly U.S. labor market update due out on this Friday will show whether July’s upward momentum in jobs growth extended into August, despite high inflation. In July, the economy generated 528,000 new jobs—the biggest monthly gain in five months—while the unemployment rate slipped to 3.5%.

Monday

• No major reports scheduled

Tuesday

• S&P/Case-Shiller 20-City Composite Home Price Index
• Consumer Confidence Index, The Conference
• Job Openings and Labor Turnover Survey, U.S. Bureau of Labor Statistics

Wednesday

• ADP National Employment Report, ADP

Thursday

• Institute for Supply Management’s manufacturing index
• Weekly unemployment claims, U.S. Department of Labor
• Construction spending, U.S. Census Bureau

Friday

• Jobs and unemployment, U.S. Bureau of Labor Statistics
• Factory orders, U.S. Census Bureau

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