Last Week on Wall Street
The overhang of Fed Chair Powell’s Jackson Hole speech the previous week carried over into last week as
investors recalibrated stock valuations amid a seemingly more assertive monetary policy stance. The Dow
Jones Industrial Average fell 2.99%, while the Standard & Poor’s 500 stumbled 3.29%. The Nasdaq
Composite index lost 4.21%. The MSCI EAFE index, which tracks developed overseas stock markets, slid
Stocks Extend Losses
Investors remained unnerved by the aggressive tone of Jerome Powell’s speech and subsequent comments
from Fed officials suggesting a higher rate hike than the market expected at the Fed two-day meeting ending
September 21. The probability of a 75 basis point hike in September rose to nearly 65%, up from just 28% a
month ago. Stocks moved steadily lower before finding some footing on Thursday. Friday’s employment
report appeared to strike a “goldilocks” note (i.e., labor gains not so strong that it might trigger greater Fed
hawkishness but robust enough to allay imminent recession fears). After early gains, stocks turned lower
ahead of the holiday weekend.
Employers added 315,000 jobs in August, maintaining the labor market’s remarkable resiliency amid a
contracting economy. The unemployment rate rose to 3.7%, up from last month's 3.5%. The gain followed
an uptick in the labor participation rate, which expanded from 62.1% to 62.4%. Wages continued to grow,
rising 0.3% in August and 5.2% from 12 months ago. Sectors seeing the most significant increases in new
jobs were professional and business services, healthcare, and retail. Lagging sectors were manufacturing,
financial, and wholesale trade.
This Week: Key Economic Data
Thursday: Jobless Claims.
This Week: Notable Companies Reporting Earnings
Thursday: Zscaler, Inc. (ZS), Docusign (DOCU).
Friday: The Kroger Co. (KR).
compelling near the lows. Markets have dips but I dont think this is a collapse for the US or Europe though there could
be more volatility short term. Don’t fall into the trap of believing all the doom you see out there.
The current malaise is unlikely to go on forever. This may be to the contrary of what mainstream media would have you
believe, but let’s face it fear sells.
The next CPI report will come out on September 13th. The data points to inflation continuing to roll over. We will
need to see several months of this before the Fed can soften their tough tone on raising interest rates. However, as I
have stated many times markets are forward looking and will see through the rhetoric to the reality of data.
Corporate earnings have been holding up well. This provides some insulation to the downside of the market.
If earnings begin to crack on a widescale basis, then the market may have more downside ahead. I say “may”
because I believe a fair amount of this has been priced in on some level due to some of the most negative sentiment
I have witnessed in my 25 years in this industry. However, fear and panic can create a short-term frenzy even if it
is not logical. This is where, as they say, money moves from weak hands to strong hands. Those with more than a
3-week time horizon will step in and snap up bargains for the longer term. Those that gave up will say “see you
can’t make any money in the market.” Warren Buffet has strong hands and would disagree with that statement.
His company, Berkshire Hathaway has spent a third of the cash they have been sitting on for many years in the last
9 months. Let that sink in for a moment.
I have a lot more I can say about what is happening and what is expected to happen, but I will save it for a later
date. The only item the market is going to care about in the next week is the CPI data that comes out next Tuesday.
Until then the market is moving on speculation and fear.
THIS WEEK'S UPDATE
September 07, 2022|