The Markets (as of market close August 19, 2022)

The four-week rally for stocks came to an end last week. Investors turned cautious after Fed officials continued to support more interest-rate hikes. Each of the major benchmark indexes lost ground, with the S&P 500 declining for the first time in five weeks. Yields on 10-year Treasuries climbed 14.0 basis points. The dollar had its best week since April 2020. Crude oil prices fell by nearly $2.00 per barrel. Gold plunged lower, falling nearly $60.00 per ounce. Traders saw the stock of a large retailer fall more than 40.0%, and cryptocurrency-linked stocks declined.

After winning days on Monday and Tuesday, last Wednesday saw stocks close lower following the release of the minutes of the Federal Reserve’s July meeting. The Dow slid 0.5%, ending a five-session winning streak. The minutes revealed that several members of the Federal Open Market Committee remained concerned that rising inflation could become entrenched in the economy, while expressing trepidation that too much tightening could send the economy reeling. Tech shares fell for the second consecutive session, dragging the Nasdaq down 1.3%.

In a day marked by ups and downs, stocks closed marginally higher last Thursday among mixed economic and earnings data.

And stocks closed last Friday lower, with each of the benchmark indexes ending the day in the red.

Eye on the Week Ahead

The second estimate of gross domestic product for the second quarter is available this week. The initial reading showed the economy retracted 0.9% in the second quarter. The report on personal income and outlays for July is also out this week. Two items that will garner particular attention are personal consumption expenditures and the personal consumption expenditures price index. Consumer spending rose 1.1% in June, while consumer prices advanced 1.0%. It will be interesting to see if the PCE price index decreases in July in line with the other inflation indicators, such as the CPI, import and export prices, and the PPI.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI, Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Forecasts are based on current conditions, subject to change, and may not come to pass. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities and other bonds fluctuates with market conditions. Bonds are subject to inflation, interest-rate, and credit risks. As interest rates rise, bond prices typically fall. A bond sold or redeemed prior to maturity may be subject to loss. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.