Stocks Mixed on Quiet Week; Taxable Bonds Down

Good morning, and welcome to the unofficial end of summer.

The Dow (+0.9%), NASDAQ (-0.9%), and S&P 500 (+0.3%) ended mixed for the final week of August.  Meanwhile, taxable bonds fell 0.5% and tax-free municipal bonds were virtually unchanged.  The 10-year Treasury yield gained 0.12% to finish the week at 3.92%.

The final week of the summer is typically quiet on Wall Street, as many institutional investors are on vacation.  Just as well, because the only two major economic reports gave little reason for the markets to move one direction or the other.  Durable goods orders – those goods expected to last more than 3 years – were virtually unchanged when looking at core data.  Similarly, the Fed-favored inflation gauge, Personal Consumption Expenditures (PCE) – remained in line with economists’ expectations.  Lastly, Nvidia, the chip maker and darling of Wall Street the past two years, produced a decent earnings report, but not enough to excite investors.  As a result, Nvidia fell over 7% for the week, dragging down the technology sector.

Now that institutional investors return from their summer vacations, all eyes will be on economic reports that will impact the Fed’s decision to cut interest rates later in the month.  As of right now, it seems that it could go either way as to whether the Fed cuts interest rates by 0.25% or 0.5%.  Most economists lean toward the smaller rate cut, as a larger rate cut could send a message that the Fed is concerned about economic conditions.  Thus, the August jobs report being released on Friday will likely be the biggest economic data release for the week, as the Fed relies heavily on that data when making rate cut decisions.  Also note that September has historically been the worst month for the stock markets, so let’s see how we do against that trend.

Have a great day and terrific holiday-shortened week.

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