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Weekly Market Recap: Equity Declines, Fed Insights, and Economic Data Thumbnail

Weekly Market Recap: Equity Declines, Fed Insights, and Economic Data

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Market Overview

U.S. and international equities experienced significant declines this week amid volatile trading sessions. The Nasdaq led the downturn, dropping 3.6%, followed by the S&P 500 at 2.6% and the Dow at 2.4%. Value stocks outperformed growth stocks, though both categories saw losses. The market was influenced by earnings from the "Magnificent Seven" and the Federal Open Market Committee (FOMC) interest rate decision. Microsoft, Amazon, and Intel experienced notable declines due to disappointing earnings and ongoing AI investment concerns. The FOMC held rates steady, with Fed Chair Powell's dovish remarks initially received positively until weaker job growth data raised concerns. European markets mirrored U.S. trends, with the STOXX 600 falling 2.9%. Asian markets also declined, driven by central bank actions and tech stock downturns.

Federal Reserve Insights and Economic Roundup

The Bloomberg U.S. Aggregate Bond Index rallied sharply as yields fell, with the 10-year Treasury yield closing almost 40 basis points lower and the two-year yield down nearly 50 basis points. The Fed’s dovish stance hinted at potential rate cuts starting in September, further supported by soft economic data later in the week. Treasury announced unchanged coupon issuance and increased TIPS sizes, aligning with the Treasury Borrowing Advisory Committee's updated recommendations. Labor market data indicated a slowdown but not necessarily a recession, with job gains concentrated in healthcare, construction, and transportation, while information sector jobs declined. The unemployment rate rose to 4.3%. The Employment Cost Index showed decelerating labor costs, suggesting easing services inflation. The Fed's policy statement prepared markets for upcoming rate cuts, highlighting the dual mandate focus as inflation rates improve and unemployment increases.

The Week Ahead

The following economic data is expected in the coming week:

  • Monday: S&P Global US Services PMI (July final), S&P Global US Composite PMI (July final), ISM Services Index (July), ISM Services Prices Paid (July), ISM Services Employment (July), ISM Services New Orders (July), Senior Loan Officer Opinion Survey on Bank Lending Practices
  • Tuesday: Trade Balance (June)
  • Wednesday: MBA Mortgage Applications (Aug 2), Consumer Credit (June)
  • Thursday: Initial Jobless Claims (Aug 3), Continuing Claims (July 27), Wholesale Trade Sales (June), Wholesale Inventories (June final)
  • Friday: No major economic releases are scheduled.