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WEEKLY SUMMARY: Tariffs, weak job data & geopolitics crushed stocks
U.S. stock indexes recorded their worst week since the early April sell-off. The Russell 2000 fell 4.2%, followed by the Dow Jones (down 2.92%) and S&P 500 (down 2.36%). The Nasdaq Composite held up best (down “only” 2.17%) helped by Microsoft and Meta which reported strong earnings. According to data from FactSet, of the 66% of S&P 500 companies that have reported through Friday morning, 82% have beaten consensus earnings estimates, with a blended earnings growth rate of 10.3%. On Thursday, President Trump signed an executive order to raise tariffs on the vast majority of U.S. trading partners, effective August 7, which appeared to weigh heavily on stock indexes on Friday. Fed holds rates steady for fifth consecutive meeting while core PCE July numbers seem to indicate that inflation accelerates. On Friday, the Labor Department reported that the U.S. economy added only 73,000 jobs in July, well below consensus estimates for a gain of around 115,000. The readings for May and June were also revised down by a total of 258,000. The worse-than-expected data—along with new tariff announcements—helped send U.S. Treasury yields across most maturities lower on Friday, with the yield on the benchmark 10-year U.S. Treasury note falling nearly 16 bps to 4.22%. In the rest of the world, the STOXX Europe 600 Index ended 2.57% lower amid disappointment with the framework trade deal between the U.S. and the EU. Gold ripped higher on Friday (best day in two months). Cryptos tumbled.
Have a great week-end
Charles for the team
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The S&P 500 index finished the week little changed, while the Nasdaq added 0.48%. The Russell 2000 Index performed worst, declining 0.86%, followed by the Dow, which shed 0.67%. Equities started the week broadly lower but reversed course toward the end of the week, supported in part by an encouraging US inflation report as well as strong earnings results from semiconductor manufacturer Micron Technology that seemed to help shift AI-related sentiment. On the macro side, US unemployment rate rose to 4.6% in November, the highest level in over four years while US core inflation dropped to slowest pace since early 2021. December business activity growth slowed to a six-month low. US Treasuries yields generally decreased across most maturities.