The major U.S. stock indexes were little changed through most of the week but ended with a decline on Friday, snapping a string of four consecutive weekly gains for the $S&P 500(.SPX)$ and the$NASDAQ(.IXIC)$. With the next U.S. Federal Reserve meeting just over a month away, investors worried about the pace of further interest-rate increases.
As of last Friday, $DJIA(.DJI)$ YTD is -6%, $NASDAQ(.IXIC)$ YTD is -18.4%, $S&P 500(.SPX)$ YTD is -10.4%. $S&P/ASX 200(XJO.AU)$ &$Straits Times Index(STI.SI)$ in YTD performance is -4.9% & 4.06% respectively.
Since bottoming out in mid-June, U.S. stocks have ushered in a rebound on expectations that the FED's aggressive interest rate hikes will help lower inflation. Subsequently, the decline in energy prices, the easing of supply chain bottlenecks, and the hope that prices have peaked to a certain extent alleviated the pressure on monetary policy. In addition, the upward revision of overall corporate profit expectations in the new earnings season further boosted market risk appetite.
Earnings season is coming to an end, investors are turning their focus back to the economic outlook for further clues about future rate hikes. The Friday Jackson Hole annual meeting and the upcoming release of inflation and nonfarm payrolls data could spark a new round of shocks in the coming weeks.
Macro Factors:
Fed's Tough Task: Minutes released from last month's U.S. Federal Reserve meeting showed that policymakers agreed they needed to keep raising interest rates, although they expressed concerns about lifting borrowing costs too fast and unduly weakening the economy.
Housing Market Slump: Sales of existing homes fell for the 6 consecutive month in July as a recent rise in mortgage rates continued to weigh on the U.S. housing market. Sales fell 5.9% versus the previous month and 20.2% relative to July 2021, according to the National Association of Realtors.
Retail Flattens Out:There was virtually no change last month in U.S. retail sales, a segment of the economy that’s recently been holding up relatively well amid high inflation. The flat result for July was attributed largely to the recent decline in the price of gasoline; excluding gas and autos, retail and food sales rose 0.7% relative to the previous month.
Currency Convergence :The year-to-date strengthening of the U.S. dollar relative to the euro has brought the value of the 2 currencies to a near-parity level. On Friday afternoon, the value of a single euro fell as low as $1.0035. The last time the two currencies reached parity was five weeks earlier during intraday trading; prior to that, the last time was in late 2002.
Sectors Performances:
In the past week, consumer staples and utilities were the two best-performing sectors of the S&P 500's 11 sectors. Defensive sector leads the way. Conversely, the two worst-performing sectors were materials and communications services, which are cyclical sectors.
Last week, most sectors drop, with Communication Services drop 3.8% the most, then Basic Materials and Technology sector followed. Consumer Defensive see 1.29% increase , and utilities see 0.84% increased.
Goldman Sachs pointed out that the cyclical sector led a bear market rally in U.S. stocks in July and early August, "however, as the defensive sector regained the lead, this wave of bear market rebound in U.S. stocks appears to have ended this week."
"When cyclicals underperform defensives, investors get nervous," Goldman said. According to Goldman Sachs, the following signs are showing that the bear market rally in US stocks is about to end.
Weekly Top Gainners of S&P 500：
$Occidental(OXY)$ ，$Coterra Energy Inc.(CTRA)$ ， $Kroger(KR)$ ，$Eli Lilly and(LLY)$ ，$PG&E Corp(PCG)$ , $Devon(DVN)$ , $CDW Corp(CDW)$ , $Cisco(CSCO)$ , $Smucker's(SJM)$ , $Hasbro(HAS)$ .
Other Markets:
Yields Rebound: Expectations for further aggressive moves to raise U.S. interest rates fueled a decline in government bond prices, sending yields to the highest level in nearly a month. The yield of the 10-year U.S. Treasury bond rose to about 2.98% on Friday, up from 2.85% at the close of the previous week.
Rising Euro Inflation: Inflation in the 19 countries that use the euro rose at an annual 8.9% rate last month, the highest level since the currency was created in 1999. A separate report from the United Kingdom showed that inflation there rose to 10.1%ꟷthe fastest pace since 1982. By comparison, the latest monthly U.S. inflation reading was 8.5%.
Gold Still Under Pressure: $Gold - main 2212(GCmain)$ has just refreshed a three-week low, and with the precious metal falling 3% last week, Wall Street is taking a negative view on gold prices this week due to a stronger dollar and pressure from the upcoming Jackson Hole central bank annual meeting.
Oil fluctuated around $90: Oil future prices fell last week, weighed down by a stronger dollar and concerns that a slowing economy would dent crude demand; Iran nuclear talks await whether the U.S. can comply with Iran’s “red line.” This week will be held in Jackson Hole annual meeting of global central bankers, also need to pay attention to the speech of the chairman of the Federal Reserve.
The Week Ahead: August 22-26
Notable Earnings: $Zoom(ZM)$ ,$Palo Alto Networks(PANW)$ ,$Macy's(M)$ ,$Intuit(INTU)$ ,$Nordstrom(JWN)$ ,$Petco Health and Wellness Company, Inc.(WOOF)$ ,$NVIDIA Corp(NVDA)$ ,$Salesforce.com(CRM)$ , $Grab Holdings(GRAB)$ ,$Dell Technologies Inc.(DELL)$ ,$VMware(VMW)$ ,$Dollar General(DG)$ ,$Dollar Tree(DLTR)$ .
Monday
- No major reports scheduled
Tuesday
- New home sales, U.S. Census Bureau
Wednesday
- Durable goods orders, U.S. Census Bureau
- Pending home sales, National Association of Realtors
Thursday
- Second-quarter GDP, second estimate, U.S. Bureau of Economic Analysis
- Weekly unemployment claims, U.S. Department of Labor
Friday
- Personal Consumption Expenditure Price Index, U.S. Bureau of Economic Analysis
- University of Michigan Index of Consumer Sentiment
- Personal income and consumer spending, U.S. Bureau of Economic Analysis
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Comments
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