Hello, this is Tom Jalics, Chief Investment Strategist at Fifth Third Bank
The major US equity indices ended mixed last week. The S&P 500 Index was up 0.8% for the week. The Nasdaq Composite closed the week up 2.3% and the Dow Jones Industrial Average was down 0.4% for the week. U.S. Treasury yields diverged last week with the 10-year U.S. Treasury note ending the week modestly down to 4.24% and the 2-year U.S. Treasury note ending the week higher at 5.08%. The 2-year/10-year U.S. Treasury yield curve remained inverted, finishing the week 84 basis points inverted. Gold finished the week 1.4% higher, ending the week at $1915/ounce. West Texas Intermediate (WTI) crude oil was down by 1.7% for the week, ending the week at $79.83/barrel.
Investor’s eyes were squarely focused on Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole annual symposium on Friday. Powell’s speech was more balanced than a year ago but continued to lean hawkish, emphasizing the need for the Fed to remain data dependent in their ongoing fight against inflation. Key takeaways are that 2.0% will remain the Fed’s inflation target, and that the Fed is likely close to completing this interest rate hiking cycle. However, the Fed will keep its options open depending on the data and will be diligent in its fight against inflation until the 2.0% target is met. Specifically Fed Chair Powell stated that, "we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data. Restoring price stability is essential to achieving both sides of our dual mandate. We will need price stability to achieve a sustained period of strong labor market conditions that benefit all."
It was a relatively quiet week on the economic front, but several domestic reports were noteworthy. Initial jobless claims decreased by 10,000 to 230,000 for the week ending August 19. Continuing jobless claims decreased by 9,000 to 1.702 million for the week ending August 12. The key takeaway from this jobs report is that labor market remains tight and that the current employment situation is not signaling an imminent recession. Investors also digested durable goods orders which declined 5.2% month-over-month in July. Excluding transportation, durable goods orders increased 0.5% month-over-month. Business spending continues at a very modest pace while transportation spending has contracted. The jobs and durable goods orders reports last week highlight a strength (employment) and a weakness (business spending) in the domestic economy.
This week, investors will get several key updates on inflation, jobs, and home prices in the U.S., as well as results from companies including Hewlett Packard, Best Buy, Salesforce, Broadcom, UBS, Dell Technologies, and Lululemon Athletica. The latest Job Openings and Labor Turnover Survey (JOLTS) report for July will come out on Tuesday, followed by ADP’s National Employment Report on Wednesday, and the Labor Department’s August nonfarm payrolls report on Friday. The Case-Shiller National Home Price Index for June will come out on Tuesday, and on Thursday, the Bureau of Economic Analysis (BEA) will release its Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, for July.
As always, we will be watching and reporting to you next week. Thank you.