Hello Investors! 🌟 This week saw volatility surge to levels not seen in over a year, with UST yields sliding to their lowest in months. Renewed concerns about wider conflict in the Middle East, coupled with fears of a rapidly decelerating US economy potentially leading to a recession, resulted in a forced recalibration in the markets. Let's delve into the key events that shaped this volatile week. 📈
**Market Overview:**
Volatility spiked dramatically as geopolitical tensions and economic concerns dominated headlines. Renewed fears about a broader conflict in the Middle East and the possibility of a more severe recession in the US led to significant market movements. The FOMC held rates steady, disappointing those hoping for a rate cut. Chairman Powell's focus on employment risks suggested that the committee is nearing a time to reduce restrictiveness, but his message didn't align with the rapidly declining labor indicators. The week ended with a weak July employment report, following a disappointing ISM manufacturing report that spooked markets on Thursday, resulting in risk-off flows and a more dovish outlook towards the Jackson Hole Symposium.
**Stock Market Performance:**
- 📉 S&P 500: Down by 2%
- 📉 Dow Jones: Down by 2.1%
- 📉 NASDAQ: Down by 3.4%
**Economic Indicators:**
US Treasury yields dropped amid a slew of softer economic readings, with the yield curve steepening significantly:
- **2-10 Year Spread:** Rose above -10 bps as futures markets and investment houses now foresee a 50 basis point Fed rate cut in September and potentially more than 100 bps in cuts by the end of 2024.
- **JOLTS Job Openings:** Showed the ratio of job openings to unemployed workers has fallen back to pre-pandemic levels.
- **ADP Employment Data:** Missed estimates, with annual pay growth slowing to its lowest level in years.
- **Weekly Initial Jobless Claims:** Hit a 1-year high at 249K.
- **ISM Manufacturing:** Missed estimates across the board, with the employment component registering its weakest reading since June 2020.
- **July Employment Report:** Payrolls, hours worked, and wages all missed estimates, with unemployment rising to 4.3%, triggering the Sahm recession indicator for the first time since the pandemic.
**Commodity Prices:**
- **Crude Prices:** Rose early in the week due to escalating tensions between Israel and Iran but sold off later on rising recession fears.
- **Gold Prices:** Climbed ~10% through Thursday due to a weaker US dollar but fell sharply after the Friday employment report.
- **Bitcoin:** Also sold off sharply after the employment report.
**Corporate News:**
- **AI and Consumer Spending:** The themes of AI investment and weakening consumer spending dominated earnings reports.
- **Nvidia:** Criticized by Elliott Management, suggesting AI is overhyped and in a bubble.
- **Arm Holdings and Intel:** Reinforced concerns with Arm guiding lower and Intel announcing a fresh turnaround plan after poor results.
- **Apple and Meta:** Reported better quarterly results, affirming significant capex growth for AI in the coming year.
- **Consumer Sector:**
- **McDonald’s:** Missed earnings and reported negative same-store sales, highlighting competition for value meals and deal-seeking consumers.
- **Amazon:** Echoed similar sentiments about deal-seeking consumers, with capex increases tied to AI spending.
- **Procter & Gamble:** Reported mixed results, noting market challenges expected to persist until the second half of next year, particularly in China.
**Market Overview:**
Volatility spiked dramatically as geopolitical tensions and economic concerns dominated headlines. Renewed fears about a broader conflict in the Middle East and the possibility of a more severe recession in the US led to significant market movements. The FOMC held rates steady, disappointing those hoping for a rate cut. Chairman Powell's focus on employment risks suggested that the committee is nearing a time to reduce restrictiveness, but his message didn't align with the rapidly declining labor indicators. The week ended with a weak July employment report, following a disappointing ISM manufacturing report that spooked markets on Thursday, resulting in risk-off flows and a more dovish outlook towards the Jackson Hole Symposium.
**Stock Market Performance:**
- 📉 S&P 500: Down by 2%
- 📉 Dow Jones: Down by 2.1%
- 📉 NASDAQ: Down by 3.4%
**Economic Indicators:**
US Treasury yields dropped amid a slew of softer economic readings, with the yield curve steepening significantly:
- **2-10 Year Spread:** Rose above -10 bps as futures markets and investment houses now foresee a 50 basis point Fed rate cut in September and potentially more than 100 bps in cuts by the end of 2024.
- **JOLTS Job Openings:** Showed the ratio of job openings to unemployed workers has fallen back to pre-pandemic levels.
- **ADP Employment Data:** Missed estimates, with annual pay growth slowing to its lowest level in years.
- **Weekly Initial Jobless Claims:** Hit a 1-year high at 249K.
- **ISM Manufacturing:** Missed estimates across the board, with the employment component registering its weakest reading since June 2020.
- **July Employment Report:** Payrolls, hours worked, and wages all missed estimates, with unemployment rising to 4.3%, triggering the Sahm recession indicator for the first time since the pandemic.
**Commodity Prices:**
- **Crude Prices:** Rose early in the week due to escalating tensions between Israel and Iran but sold off later on rising recession fears.
- **Gold Prices:** Climbed ~10% through Thursday due to a weaker US dollar but fell sharply after the Friday employment report.
- **Bitcoin:** Also sold off sharply after the employment report.
**Corporate News:**
- **AI and Consumer Spending:** The themes of AI investment and weakening consumer spending dominated earnings reports.
- **Nvidia:** Criticized by Elliott Management, suggesting AI is overhyped and in a bubble.
- **Arm Holdings and Intel:** Reinforced concerns with Arm guiding lower and Intel announcing a fresh turnaround plan after poor results.
- **Apple and Meta:** Reported better quarterly results, affirming significant capex growth for AI in the coming year.
- **Consumer Sector:**
- **McDonald’s:** Missed earnings and reported negative same-store sales, highlighting competition for value meals and deal-seeking consumers.
- **Amazon:** Echoed similar sentiments about deal-seeking consumers, with capex increases tied to AI spending.
- **Procter & Gamble:** Reported mixed results, noting market challenges expected to persist until the second half of next year, particularly in China.
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If you appreciate my technical analysis and want to check out our
Free Newsletter --> diywallst.substack.com/about
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.