Closing Stock Market SummaryAfter some whipsaw action immediately following Fed Chair Powell's speech today, the market trended decidedly lower into the close. The market opened to only modest losses after a welcomed moderation in the July PCE Price Index before Mr. Powell's comments fueled a negative disposition. Market participants got the impression that the Fed is going to keep raising rates to a restrictive level and won't be pivoting to a rate-cut cycle anytime soon. Notably, Mr. Powell said the effort to reduce inflation "will also bring some pain to households and businesses."
The major indices logged most of their weekly losses during this session. The S&P 500 closed down 4.0% on the week; the Dow Jones Industrial Average closed down 4.2% on the week; the Nasdaq closed down 4.4% on the week.
Most stocks sold off today leading every S&P 500 sector to close with losses that ranged from 1.0% (energy) to 4.1% (information technology). The technology sector was driven lower by its semiconductor components, which sold off more sharply than the broader market. The PHLX Semiconductor Index closed down 5.5%.
Energy had the slimmest losses with WTI crude oil futures settling 0.1% higher at $93.13/bbl. Notably, it's the only sector with gains on the week, up 4.3%.
Mega caps and growth stocks closed with somewhat steeper losses than their peers, but selling interest was broad-based and left the major indices down by 3.0% or more. Notably, the Dow Jones Industrial Average fell more than 1,000 points today.
The Vanguard Mega Cap Growth ETF (MGK) closed down 4.1% versus a 3.2% loss in the Invesco S&P 500 Equal Weight ETF (RSP). The Russell 3000 Growth Index closed down 3.6% versus a 2.7% loss in the Russell 3000 Value Index.
While most stocks trended lower, the CBOE Volatility Index moved markedly higher, up 17.5% or 3.80, to 25.58.
Market breadth showed a strong skew towards decliners with the margin increasing throughout the session. Shortly after Fed Chair Powell's speech concluded, decliners led advancers by a 5-to-1 margin at the NYSE and a roughly 3-to-1 margin at the Nasdaq. At the close, decliners led advancers by a nearly 7-to-1 margin at the NYSE and a greater than 4-to-1 margin at the Nasdaq.
The Treasury market had a volatile session. Participants first reacted positively to relatively pleasing PCE Price Index data before they had a less bullish reaction to Mr. Powell's comments. The 2-yr note yield rose one basis point on the day, and 15 basis points on the week, to 3.40%. The 10-yr note yield rose one basis point on the day, and five basis points on the week, to 3.04%.
There is no U.S. economic data of note on Monday.
Reviewing today's economic data:
- Personal income increased 0.2% month-over-month in July ( consensus +0.6%) following an upwardly revised 0.7% increase (from 0.6%) in June. Personal spending rose just 0.1% month-over-month ( consensus +0.4%) following a downwardly revised 1.0% increase (from 1.1%) in June.
- The PCE Price Index declined 0.1% month-over-month ( consensus +0.1%), which left it up 6.3% year-over-year versus 6.8% in June. The core PCE Price Index, which excludes food and energy, increased 0.1% month-over-month ( consensus +0.3%), which left it up 4.6% year-over-year versus 4.8% in June.
- The key takeaway from the report was the disinflation seen in the PCE Price Indexes, and the boost, albeit a small one, in real spending that will be positive for Q3 GDP forecasts.
- The final August University of Michigan Index of Consumer Sentiment checked in at 58.2 ( consensus 55.1). That was better than the preliminary reading of 55.1 and up from the final July reading of 51.5. In the same period a year ago, the Index of Consumer Sentiment stood at 70.3.
- The key takeaway from the report is that the gains in sentiment were broad based and aided by the recent deceleration in inflation that coincided with falling gasoline prices.
Dow Jones Industrial Average: -11.2% YTD
S&P 400: -12.0% YTD
S&P 500: -14.9% YTD
Russell 2000: -15.4% YTD
Nasdaq Composite: -22.4% YTD