Wall Street experienced a notable downturn last week, with the major benchmark stock indexes closing sharply in the red. A weaker-than-expected jobs report, rising unemployment claims, disappointing corporate earnings from major tech firms, and falling manufacturing data prompted the major sell-off last week. Evidence of a slowing economy may prompt the Federal Reserve to cut interest rates in September, but many analysts and stock market traders believe the Fed is behind the curve in cutting rates, especially when other central banks have already done so. There was a huge swing in the market sectors last week, where utilities (4.5%) and real estate (3.9%) turned sharply higher, while information technology (-4.1%), consumer discretionary (-3.8%), and energy (-3.4%) turned sharply lower. Bond prices jumped higher as demand increased, pulling yields lower. Ten-year Treasury yields fell to their lowest level since December 2023. Crude oil prices dropped by more than 3.5%, while gold prices climbed higher.
Last Week’s Economic News
- The Federal Open Market Committee met last week and decided to keep the target range at its current 5.25%-5.50%.
- Employment slowed in July, according to the latest data from the Bureau of Labor Statistics.
- According to the latest Job Openings and Labor Turnover Summary, the number of job openings, at 8.2 million, was unchanged in June from May but was 941,000 less than the estimate from a year earlier.
- Manufacturing regressed in July as new orders declined for the first time in three months.
- The national average retail price for regular gasoline was $3.484 per gallon on July 29.
- For the week ended July 27, there were 249,000 new claims for unemployment insurance, an increase of 14,000 from the previous week’s level.
Eye on the Week Ahead
There isn’t much in terms of economic reports available this week. Of some interest is the S&P Global’s survey of service providers for July. The services sector has shown marked resilience during the period of restrictive economic policy and has steadily expanded.
Have a nice week!
Sincerely,
Robert G. Carpenter