Weekly Market Recap: Volatile Trading, Bond Market Shifts, and Fed Speculation
Market Overview
In a volatile trading week, U.S. equities faced ups and downs, with major indexes ending mostly lower. The Nasdaq recorded its fourth consecutive week of declines, closing down 0.35%. The Dow Jones Industrial Average fell by 0.8%, while the S&P 500 remained largely unchanged. Growth and value stocks moved closely in tandem, with growth edging out a slight lead.
Monday kicked off with a sharp global sell-off driven by concerns over a potential U.S. economic downturn, exacerbated by yen carry-trade unwinding following the Bank of Japan's rate hike. As the week progressed, markets rebounded due to positive U.S. services data and a drop in jobless claims, which helped to soothe earlier economic fears. International markets mirrored these movements, with Japan initially experiencing a significant drop but later recovering partially, while European markets remained relatively stable.
In the fixed-income market, bond yields fluctuated in response to global events and Treasury auctions. The 10-year Treasury yield closed three basis points higher, while the 2-year yield added seven basis points. Despite some recovery, the yield curve remains inverted, signaling ongoing concerns about economic stability.
Federal Reserve Insights and Economic Roundup
Initial jobless claims fell to 233,000, but continuing claims rose to 1.88 million, indicating a slowing job market. Consumer credit demand also declined, with revolving credit dropping 1.5%—the largest decline since early 2021. This trend suggests a potential slowdown in consumer spending, particularly among lower-income consumers, which could prompt the Federal Reserve to take more aggressive action in September.
The Week Ahead: Key economic data scheduled for the upcoming week includes
- Monday: New York Fed 1-year Inflation Expectations, Monthly Budget Statement
- Tuesday: NFIB Small Business Optimism, Producer Price Index (PPI)
- Wednesday: CPI data, Real Average Earnings
- Thursday: Retail Sales, Initial and Continuing Jobless Claims, Industrial Production
- Friday: Housing Starts, University of Michigan Report