Last week was the worst week for the S&P 500 since March. That said, the stock market needed a breather. Given recent gains, and the year-to-date gain, it’s natural to expect that market prices would take a step (or two) back before moving forward again. Match that expectation with the seasonal tendency for stocks to languish in August (and September), coupled with below average volume due to summer holidays, it shouldn’t be a surprise prices faltered last week.
Reasonable enough, but a lot did happen last week! U.S. government debt was downgraded by Fitch. Long-term bond yields moved to their highest levels on the daily charts since last fall (when stocks bottomed). Last Friday’s labor data, while still showing growth, was weaker than expected. The Bank of Japan will now let interest rates rise more freely, something they haven’t allowed in years. In turn, the yen rose by 1.5% against the dollar from valley to peak in just two days. That’s a big move. Apple, the largest stock in the stock market, and larger than all stocks in the Russell 2000 combined, reported another year-over-year revenue decline. Gas prices moved higher (as are many commodities), and are now back at their highest levels since late last year. Gas prices are now up over 20% since their 2022 lows. Those price increases won’t help the year-over-year inflation numbers later this year.
As for this coming week, this week’s U.S. Economic Calendar includes Thursday’s Consumer Price Index (CPI). While the headline number is currently expected to rise a bit again, the important core (ex-food and energy) CPI is expected to drop to 4.7%. We will also get more earnings reports, as 2Q23 earnings season is drawing near its end. That said, it will be interesting to see what happens in the bond, commodity and currency markets this coming week (and beyond). Each of these markets are saying something different than they were earlier this year. Has the tide shifted again in market leadership given the clues these markets are providing?
Add it all up...
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