Markets Mixed on Fed Rate Hike Fears; Bonds Slump
Good morning, and welcome to the unofficial end of summer,
The Dow (-0.3%), NASDAQ (+0.4%), S&P 500 (+0.1%), and EAFE (-0.2%) were mixed for the week. Meanwhile taxable bonds and tax-free municipal bonds were both down, losing 0.2% and 0.8%, respectively. The 10-year Treasury yield rose 0.05% to finish the week at 4.78%.
Once again, good news is bad news, as economic data continued to pour in and consistently show the US economy remains on strong footing, but the inflation readings continue to remain elevated. The August labor report was released on Friday and showed a gain of 162,000 jobs, exceeding economists’ expectations of a 53,000 gain. Plus, the two prior months were adjusted upward, demonstrating that the labor market continues to remain robust. In addition to the strong labor report, the Institute of Supply Managers (ISM) manufacturing and service reports also came in strong, with the larger services sector exhibiting robust gains. However, that report also showed that the prices paid component also rose, confirming inflationary pressure.
With the strong job market and inflation remaining high, that provides fuel for the Fed to raise interest rates at its meeting next week, which caused the stock and bond markets to slump. In this holiday-shortened week, we will also see two key inflation reports – the Producer Price Index (PPI) and the Consumer Price Index (CPI). These reports will likely solidify the Fed’s interest rate move next week, which is widely expected that the Fed will raise interest rates.
Have a great day and terrific week!
Source: Yahoo Finance
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The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
