(Justin Vaughn, Editor, Options Trading Report)
After an erratic month, stocks on all exchanges surprisingly finished higher. The Dow Jones Industrial Average closed the month up 1.8%, while the S&P 500 advanced 2.3% and the robust heavy tech Nasdaq Composite edged up 0.6%. Friday was the tipping point as the techs and chips and value stocks all firmed up after a topsy-turvy four weeks. As data confirmed, inflation is slowing, labor is cooling and retail sales were better than economists predictions. Also, unemployment remained steady with no surge in claims. Fed Chair Jerome Powell continues to ‘ponder’ (to a degree) when to initiate a rate cut and how much it will be. It will probably be determined after the September 17-18 meeting. Friday’s surge in the market was notable with the DowJones up 228 points. Bond activity for the 10-year was uneven as the yield on the 10-year Treasury finished the month at 3.910% up from 3.855%. “Now, we’re just a couple weeks away from the Fed meetings, whereas before the thought was: Are we really going to have to wait six weeks for the Fed to make an announcement,” said Ed Clissold, chief U.S. Strategist at Ned Davis Research.
September opened with a massive sell-off, with the Dow Jones Industrial Average diving 626 points while the tech heavy Nasdaq Composite was gutted for 577 points, the S&P 500 slid 119 points. Investors and traders and players, of which many had vacationed during the summer months up to Labor Day, had plenty of time to think about all the influencing factors weighing on the economy and driving the market as the first shortened week opened. The Dow Jones Industrial Average, after a 3 week run, setting new records along the way was devastated with the effects of the sell-off. The Nasdaq Composite suffered losses on high tech stocks that were considerable as Nvidia led the down-slide, and a huge devaluation. Oil prices have weakened, putting oil stocks under pressure as Brent crude hovered in the $70 a barrel range. Consumers have benefitted as gasoline prices have steadily fallen to an average price of $3.29 a gallon. According to FactSet, treasuries lagged with the 10-year settling at 3.88. Friday’s coming release of The Bureau of Labor Statistics Jobs report for August will highlight an “expected gain of nonfarm payrolls.” (July’s increase was 114,000)
Thursday’s market continued ‘Floundering’ as major concerns and worries about the economy continued to surface. Investors were swayed that just maybe there are some ‘holes’ that could impede what was thought to be a growing somewhat strong environment. All week the market was uneasy over the meteoric rise and fall of the Magnificent 7 and other high tech and chip equities and their future trajectories. Billions of devaluation have occurred in this sector with a domino effect cloud hanging over the entire market. Gold is strong at $2,545.20 as banking institutions worldwide are allocating major purchases. The ‘shiny metal’ always a safe haven, is now a stalwart bank investment. Gold Strategists are now predicting gold will appreciate on a steady basis, maintaining valuation in declining markets.
One Million Lost Workers…. After a devastating worldwide pandemic, lingering for four to five years, economies world wide are still in the recovery mode. The U.S. economy is no exception, as 1,000,000 workers are ‘gone’ from the workforce. “People can’t go back to work or have to significantly cut down on the amount of work they handle,” said Akido Iwaski, an immunology professor at Yale School of Medicine. “Nearly 3.5 million are reported to have ‘Long Covid’ seriously impairing their ability to return to their level of work and daily activities,” according to a survey by the Federal Centers for Disease Control and Prevention.
RUMBLINGS ON THE STREET
Joanne Hsu, Overseer of The University of Michigan Consumer Sentiment Gauge, WSJ – “Sentiment is drifting up. Consumers are hearing increasingly negative views about labor markets, but they don’t seem at all worried about it.”
Josh Hirt , senior economist at Vanguard, WSJ – “Spending and incomes have generally been healthy. Overall GDP growth has been healthy. But you haven’t seen that positive environment reflected in sentiment data.”
Scott Chronert, Citoi Strategist, Barron’s – “We’re closer to seeing the whites of the eyes of a Fed pivot, and there’s a more traditional rotation (into value),” says Mr. Chronert. He adds, “That’s your index math of how you move to 6000.” (speaking of the move of the S&P 500)
Sam Goldfarb, David Uberti, Hannah Miao, Financial Writers for Wall Street Journal, “This year’s ascent has been mostly led by shares of tech giants, but the rally has widened in recent months. Investors have rotated into areas of the market that had lagged behind, such as smaller companies and more economically sensitive sectors.”