Stocks Mixed and Bonds Rise Sharply on Anticipated Interest Rate Cuts

Good morning,

The Dow (-0.3%), NASDAQ (+1.1%) and S&P 500 (+0.4%) were mixed for the week.  Meanwhile, taxable bonds and tax-free municipal bonds rose sharply, gaining about 0.9% for the week.  The 10-year Treasury yield fell 0.13% to finish the week at 4.09%.

Stocks started the week lower on renewed tariff uncertainty following a court decision that the tariffs are illegal.  Then on Friday, the August labor report came in weak, sending stocks sharply higher.  Yes, bad news was good news again, which I find frustrating.  Regardless, the weak jobs data pretty much confirmed that the Fed will likely cut interest rates 0.25% at its meeting next week, but now there are many investors who think a rate cut of 0.50% could occur, which was what sent stocks soaring.  Other economic data reported last week were fairly strong, as the Institute of Supply Managers (ISM) Manufacturing and Services reports indicated that both sectors are improving, and the prices components have fallen slightly, while still remaining elevated.

So, we can expect more volatility as it surrounds the continued saga of the tariffs, their legality, and their potential impact on the economy.  Then, we have the Fed meeting next week, and if the Fed cuts rate by the full 0.50%, then how will investors react?  Will they cheer, or will they worry that the Fed sees something they don’t?  Lastly, the US fiscal year end on September 30, and we still don’t have an approved budget.  That will likely spark some debates in Washington, along with additional volatility.  Like we really need more of that, right?

Have a great day and rest of your week.

^{Source:  Yahoo Finance}

^{Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.}

^{The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.}

^{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.}