The Federal Reserve continues to hold sway over the market, with stocks now having racked up two consecutive down days.
Last week, the Commerce Department reported that personal consumption expenditures (PCE) for July increased 6.3% year over year, while the core PCE, which excludes food and energy prices, advanced 4.6%. These readings marked a further easing of inflation, however any hopes that the Federal Reserve would soon ease up on tightening the monetary reins were dashed when Chairman Jerome Powell remarked that aggressive rate hikes would continue. In response, the Dow Jones Industrials plummeted more than 1,000 points on Friday.
Monday’s activity continued in the same direction, with the Dow Jones Industrial Average down 184 points, or 0.6%, while the S&P 500 shed 27 points (0.7%). And, as is often the case, the tech-focused NASDAQ made the biggest move, sliding 124 points, or 1%. Most of the major market sectors ended the day in the red, with the largest declines sustained by technology (-1.3%), communications (-0.9%) and financials (-0.8%). Meanwhile energy stocks bucked the trend, rising 1.5%. Oil prices advanced, with West Texas Intermediate rising 4.2%, to about $97.00 a barrel. The move follows word from Saudi Arabia last week that OPEC and its allies were considering production cuts.
Mr. Powell indicated that the lead bank’s next step has not been determined yet, noting that it will depend on the flow of economic data and how the outlook evolves. However, the consensus on the Street continues to expect an increase of one-half to three-quarters of a percentage point at the Fed’s upcoming meeting in September.
Until then, traders will have some economic news to digest this week, including today’s release of the S&P Case-Shiller U.S. home price index for June, and the Labor Department’s report on job openings and labor turnover for July. On Thursday, we get the Institute for Supply Management’s manufacturing index for August and the July totals for construction spending. The week concludes with Friday’s release of the August numbers for nonfarm payrolls, the unemployment rate, and average hourly earnings.
As we approach the opening bell for today’s session, U.S. stock futures are pointing to a positive open. Elsewhere, Asian markets were mixed in overnight trading, while stocks in Europe are solidly in the green. Meanwhile, oil futures have slipped 2.5%, to around $94.55 a barrel.
– Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
