Concerns that the Fed may raise interest rates soured investor sentiment, sending stocks lower in a holiday-shortened trading week.
The Dow Jones Industrial Average slipped 0.75%, while the Standard & Poor’s 500 declined 1.29%. The Nasdaq Composite index dropped 1.93% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.28%.1,2,3
Stocks Resume Their Decline
Stocks were bedeviled by rising bond yields and higher oil prices last week, with technology shares bearing the brunt of the decline. Hopes that the Fed may not find it necessary to raise interest rates were dented by economic data reflecting higher prices, rising labor costs, and fewer-than-forecast initial jobless claims.
The inflationary implications of higher oil prices also contributed to the growing sense that the Fed may implement additional rate hikes. While bond traders generally still expect no rate hike in September, the likelihood of a 0.25% rate hike or higher in November jumped to 43.3% by Friday morning from 35.4% a week ago.4
Oil Prices Spike
Last week, Saudi Arabia and Russia announced they would extend their oil production cuts to the end of the year. Investors had expected these cuts to be stretched to October, so the three-month extension surprised the markets.
The announcement sent oil prices higher on supply shortage worries in the coming winter months, with the West Texas Intermediate (WTI) oil price climbing to a 10-month high.5
Higher oil prices also sparked concerns that it would make the Fed’s inflation fight more difficult, potentially forcing the Fed to hike rates above market expectations.
This Week: Key Economic Data
Wednesday: Consumer Price Index (CPI).
Thursday: Jobless Claims. Producer Price Index (PPI). Retail Sales.
Friday: Consumer Sentiment. Industrial Production.
Source: Econoday, September 8, 2023
This Week: Companies Reporting Earnings
Thursday: Adobe, Inc. (ADBE)
Source: Zacks, September 8, 2023
Footnotes and Sources
2. The Wall Street Journal, September 8, 2023
3. The Wall Street Journal, September 8, 2023
4. CME Group, September 8, 2023
5. Reuters, September 5, 2023
6. IRS.gov, January 11, 2023
7. American Heart Association, April 24, 2023
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
Copyright 2023 FMG Suite.
Weekly Market Insights: Will the Fed Raise Interest Rates?
| September 12, 2023