Stocks fluctuated last week, jostled by fitful bond yields and headline news, before ending strongly following Fed Chair Powell’s comments on the monetary outlook.
The Dow Jones Industrial Average slipped 0.45%, while the Standard & Poor’s 500 gained 0.82%. The Nasdaq Composite index rose 2.26% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 0.78%.1,2,3
Stocks Manage Gains
Stock rallied on Monday on upbeat sentiment over the earnings release from a mega-cap semiconductor company scheduled for mid-week, only to see that momentum fizzle the following day on weak retail earnings and a credit downgrade of a handful of banks.
Stocks resumed their rally on weak economic data, which fueled hopes for future Fed dovishness. They also rose on expectations that earnings from a leading AI chipmaker would validate the AI narrative that propelled markets in the second quarter. Despite a blowout earnings report, stocks turned lower as investor attention quickly switched to Fed Chair Powell’s presentation scheduled for Friday.
After some initial jitteriness, Investors responded well to Powell’s comments, posting gains to close the week.
Powell Stands Firm
Powell spoke on Friday at the Fed’s annual economic symposium in Jackson Hole, asserting that, despite considerable progress, inflation remained too high and additional rate hikes may be in the offing. He acknowledged that previous rate increases had not yet thoroughly worked their way through the system, so caution about further hikes was needed.
Investors reacted to Powell’s comments far better than in August 2022, when a hawkish presentation sent stocks lower. Powell also addressed a growing feeling among investors that the Fed may eventually raise its inflation target to 2.5-3.0%. Powell rejected this idea unambiguously, stating that the two percent target would remain the Fed’s inflation goal.
This Week: Key Economic Data
Tuesday: Consumer Confidence. Job Openings and Turnover Survey (JOLTS).
Wednesday: Automated Data Processing (ADP) Employment Report. Gross Domestic Product (GDP).
Thursday: Personal Income and Outlays. Jobless Claims.
Friday: Employment Situation. Institute for Supply Management (ISM) Manufacturing Index.
Source: Econoday, August 25, 2023
This Week: Companies Reporting Earnings
Tuesday: Hewlett Packard Enterprise Company (HPE), HP, Inc. (HPQ)
Wednesday: Salesforce, Inc. (CRM), Veeva Systems, Inc. (VEEV), CrowdStrike (CRWD).
Thursday: lululemon athletica, inc. (LULU), Broadcom, Inc. (AVGO), Dollar General Corporation (DG), Dell Technologies, Inc. (DELL), VMware, Inc. (VMW)
Source: Zacks, August 25, 2023
Footnotes and Sources
2. The Wall Street Journal, August 25, 2023
3. The Wall Street Journal, August 25, 2023
4. IRS.gov, March 1, 2023
5. Formstack, April 24, 2023
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Weekly Market Insights: Stocks Retreat; Powell Talk Goes Hawk
August 29, 2023