September kicked off with all the grace of a bull in a china shop. The S&P 500 tumbled 2.9% over the week, closing at 4,458.23. The Dow Jones Industrial Average wasn’t far behind, shedding 2.7% to end at 34,576.59. But the real drama queen was the Nasdaq Composite, which plunged 3.6% to 13,761.53.
Last week, the Treasury and bond markets experienced a notable shift, primarily driven by dovish signals from the Federal Reserve. Treasury yields generally moved lower, with the 10-year yield dropping 3 basis points to 3.73% and the 30-year bond yield falling 4 basis points to 4.02%. The 2-year Treasury yield, more sensitive to Fed policy changes, settled at 3.66%.
This movement pushed the yield curve back into positive territory after a period of inversion. The bond market’s positive response extended across various sectors, including investment grade and high yield corporates, mortgage-backed securities, taxable municipals, preferreds, senior loans, and emerging markets, all of which delivered positive total returns.
Municipal bonds also saw declining yields, accompanied by high new issue supply and significant fund inflows. These market movements were largely attributed to Fed Chair Powell’s remarks at Jackson Hole, which hinted at a potential rate cut in September and expressed increased confidence in inflation’s trajectory towards the 2% target. This sentiment from the Fed sparked optimism in the bond market, leading to lower yields and positive returns across the fixed income landscape.
As the inimitable Warren Buffett once quipped, “Only when the tide goes out do you discover who’s been swimming naked.” Well, this week, the tide certainly receded, and we got quite an eyeful.
US Market Highlights
- Factory Fumble: U.S. manufacturing is stumbling like a newborn giraffe. The ISM Manufacturing Index crawled to 47.2%, marking the 10th consecutive month of contraction. New orders slumped to 46.8%, while the employment index dipped to 48.5%. It’s like watching a slow-motion replay of economic deceleration.
- Job Market Juggling Act: August job growth was as lackluster as a B-movie sequel, adding just 142,000 jobs against expectations of 170,000. The unemployment rate ticked down to 4.2%, but don’t pop the champagne yet. A whopping 4.1 million people are now working part-time for economic reasons, up 217,000 from July. It’s like we’re becoming a nation of side-hustlers.
- Tech Tumble: The Philadelphia Semiconductor Index (SOX) took a nosedive that would make Olympic divers jealous, plummeting 12.2% to 3,368.17. Broadcom led the parade of disappointment, shedding 15.9% to close at $857.55 after forecasting fiscal Q4 revenue of $9.27 billion, below the $9.28 billion analysts expected. Talk about missing by a whisker!
- Sector Shuffle: While most sectors were doing the limbo, real estate and consumer staples were barely swaying to the beat. Real estate eked out a 0.2% gain, closing at 232.45, while consumer staples inched up 0.6% to 728.91. Meanwhile, information technology (-7.1%), energy (-5.6%), and communication services (-5.1%) were dancing to a decidedly bearish tune.
Global Highlights
Let’s take a whirlwind tour around the globe:
- Canada’s Rate Limbo: The Bank of Canada cut rates for the third time, bringing the key rate down to 4.25%. It’s like they’re playing financial limbo – how low can they go?
- China’s Cautious Cha-Cha: The People’s Bank of China is tiptoeing around easing policies. With the reserve ratio at 7%, they’re hinting at smaller cuts. It’s like they’re trying to perform surgery with a sledgehammer – tricky business.
- Germany’s Manufacturing Malaise: German factory output slumped 2.4% in July, worse than the 0.8% drop economists expected. The country’s manufacturing PMI sits at a dismal 39.1. It’s as if the German economic engine is running on fumes.
- Australia’s Economic Snooze: The Land Down Under’s annual growth crawled to 1.0%, the weakest since 1992 (excluding the pandemic). Quarterly growth inched up by just 0.4%. It’s like watching paint dry, but less exciting.
Commodities & Crypto Corner
Oil’s Slip ‘n Slide: Brent crude slid 7.3% over the week to $71.00 a barrel, while WTI dropped 7.6% to $67.80. It’s like watching a greased pig contest at the state fair.
Gold’s Glitter: The yellow metal held relatively steady, dipping just 0.3% to $2,509 per ounce. It’s the financial equivalent of a rock in a stormy sea.
Crypto’s Wild Ride: Bitcoin tumbled 2.3% to $57,300, while Ethereum slipped 1.8% to $2,400. The total crypto market cap shrunk by $52 billion over the week. It’s like watching a high-stakes game of financial musical chairs.
Calendar – The Week Ahead
Buckle up for a data-packed week:
- Monday: Apple’s annual showcase. Will the new iPhone 15 dazzle or disappoint?
- Wednesday: U.S. CPI report. Analysts expect a 0.6% month-over-month increase.
- Thursday: U.S. PPI and ECB rate decision. Will the ECB hike rates for the 10th consecutive time?
- Friday: University of Michigan Consumer Sentiment Index. The preliminary August reading was 69.5.
Remember, in this financial rollercoaster, it’s not about avoiding every dip and turn. It’s about strapping in for the long haul and keeping your eyes on the horizon. Your strategy should be as flexible as a yoga instructor and as steady as a surgeon’s hand.
