WEEKLY SUMMARY: S&P500 & Nasdaq post worst week since March
The Fed held its September meeting and the message from Jay Powell was clear: they will continue to keep rates elevated until inflation moves more convincingly toward 2.0%. The Fed held rates steady at 5.25% - 5.5% at this meeting but kept the option of an additional rate hike on the table, maintaining its outlook for a peak fed funds rate of 5.6%. The S&P 500 and the technology-heavy Nasdaq Composite reacted negatively, dropping 2.9% and 3.6% respectively. That marked the third straight negative week and worst weekly performance since March for each. As Vanda Research notes, inflows into the artificial intelligence (AI) sector continue to decline. The VIX jumped back above 17 on the week. Bond yields surged after the central bank forecasted one more rate hike for 2023. The pan-European Stoxx 600 index lost mearly 1,6% for the week — its worst performance since mid-August. Within Fixed Income, the benchmark 10-year Treasury yield popped to its highest level since 2007 this week. Meanwhile, the 2-year rate touched its highest level since 2006. Concern also grew around a government shutdown, which could dent consumer confidence and slow down the economy further. House Republican leaders sent the chamber into recess on Thursday. The dollar rallied on the week (up for the 8th week of the last 9)... Oil prices caused lots of excitement intraweek but ended unchanged with WTI hovering around $90.50. Bitcoin was noisy on the week but basically closed unchanged at around $26,500...
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Major US stocks indexes declined during the week, although the S&P 500 Index held up best, falling just 0.2%. Stocks opened sharply lower to start the week in response to the prior Friday’s announcement from Trump stating that the U.S. would be implementing 25% tariffs on imports from Mexico and Canada, along with 10% levies on Chinese imports, as of February 1. However, by the end of Monday, Trump had agreed to postpone tariffs on Mexico and Canada for 30 days, which helped stocks recover some of their early losses by the end of the week. Earnings season was another notable driver of sentiment; according to data from FactSet, 77% of S&P 500 Index companies that have reported Q4 results have posted consensus-topping earnings, with an average growth rate of 16.4% (compared with estimates for 11.9% earnings growth).