Hello, this is Josh Waynick, Investment Strategist at Fifth Third Bank
Major US equity indices disappointed investors with negative returns over the last week. Specifically, the S&P 500 moved lower by 2.1%. The Nasdaq Composite was down 2.6% and the Dow Jones Industrial Average fell 2.1% for the week. Looking at the U.S. Treasury yield curve, over the last week yields rose across all term points with longer maturities seeing a larger increase in yields than shorter maturities, unwinding some of the current US Treasury yield curve inversion. The U.S. 10-year Treasury Note yield rose to 4.25% with the U.S. 2-year Treasury Note rising to 4.94%. As a result, the 2-year/10-year U.S. Treasury Curve remained inverted and ended the week at 69 basis points inverted. Similar to yields, the US Dollar index, measuring the relative strength of the US Dollar against a basket of global currencies, ended the week higher by 0.5%. Gold fell last week by 1.3%, ending the week at $1,889 per ounce. Additionally, West Texas Intermediate crude oil fell by 2.3% over the week, ending at $81.25 per barrel.
Looking at the past week with a bit more color, domestic equity markets declined the most on Tuesday and extended the losses over the rest of the week. From an economic lens, the past week was quiet both in number of reports and reports surprising market participants. Notable reports and reported values included the Empire Manufacturing reading for August which came in both significantly below last month and significantly lower than market expectations. Looking at labor, the weekly initial unemployment claims number came in slightly below last week but in-line with expectations. Continuing unemployment claims came in 32,000 higher than last week and 16,000 higher than expectations. Broadly, market participants have noticed some softening in labor markets. However, the U.S. economy continues to observe a historic labor gap with roughly 3.5 million more job openings than job seekers.
In the week ahead, investors will be paying close attention to the Federal Reserve’s Annual Jackson Hole Economic Symposium. Specifically, market participants will be intently listening to Federal Reserve Chair Jerome Powell’s speech on August 25th. From an economic release perspective, the week ahead is relatively quiet. On the 23rd S&P Global will provide updates on their purchasing manager indexes domestically and internationally. Domestically, markets are expecting the narrative from last month to continue with manufacturing PMIs in contraction territory and service PMIs in expansion territory. The following day, investors will look forward to the release of Durable Goods Orders where market participants are currently expecting a pullback from last month’s robust reading. Second quarter earnings season continues to wrap up. Thus far, 95% of the S&P 500 has published their financial results. Bloomberg has detailed modest growth in topline sales quarter-over-quarter, but a contraction in overall company earnings relative to last quarter. Positively, earnings results have exceeded company guidance. In the next week some of the final companies in the S&P500 will report second quarter earnings including: Lowe’s, Medtronic, and most notably NVIDIA.
As always, we will be watching and reporting back to you next week. Thank you.