Weekly Market Recap: U.S. Stocks Slide, Fed's Next Move in Focus

Market Overview:

U.S. equities began September with a decline, consistent with the month’s historically challenging reputation. The S&P 500 dropped about 4%, driven by a weaker-than-expected August payroll report and mixed economic data, such as the soft ISM manufacturing and ADP private payrolls reports. Technology stocks, particularly semiconductors, saw notable losses, with Broadcom's disappointing outlook exacerbating the downturn. International equities also faced declines, impacted by weak German data and hawkish comments from the Bank of Japan. The MSCI EAFE and MSCI Emerging Markets indexes posted slightly smaller losses than their U.S. counterparts, as energy prices fell, and AI-related weakness carried over globally.

Federal Reserve Insights & Economic Roundup:

The bond market saw gains, with U.S. Treasury yields falling following the weaker jobs report. The yield curve dis-inverted as shorter maturity yields led the rally, particularly the 2- and 5-year Treasuries. At the Jackson Hole Economic Summit, Federal Reserve Chair Jerome Powell emphasized balanced risks between inflation and employment, highlighting that further cooling in the labor market is not desired. Although the August jobs report showed some signs of labor market cooling, aggressive rate cuts remain priced into the market, with over 1.0% expected this year. Commodities faced pressure, especially crude oil, which declined 8%, while natural gas rose on higher demand forecasts. Gold surged 3.4% amid falling Treasury yields and safe-haven buying.

The Week Ahead:

Key data releases for the upcoming week include Consumer Credit and Wholesale Inventories on Monday, CPI on Wednesday, PPI on Thursday, and Import/Export Price Indexes alongside University of Michigan Sentiment on Friday.