EZBites for the week ending August 18, 2023
DOW:-2.2% (YTD:+4.1%)
NASDAQ: -2.6% (YTD:+27.0%)
S&P: -2.1% (YTD:+13.8%)
The U.S. major indices all closed with losses this week, driven by rising market rates and carryover downside momentum after the persistent selling in August. Some of the sessions this week featured below average volume, which is consistent with late-summer.
This week's selling led the S&P 500 to breach support at its 50-day moving average for the first time since March and take out support at the 4,400 level.
The price action in Treasuries was one of the biggest catalysts for selling interest in the stock market. The 10-yr note yield, which settled at its highest level since November 2007 on Thursday (4.31%), rose eight basis points this week to 4.25%.
The 10-yr note yield is now up 29 basis points for the month with participants keying on supply matters and incoming data that continue to validate the soft landing/no landing scenario that presumably will keep inflation above the Fed's 2.0% goal and the Fed itself in a higher-for-longer mindset that includes a consideration of raising rates yet again.
Participants received the FOMC Minutes from the July 25-26 meeting this week, which induced some volatility in the immediate aftermath of the release. The immediate selling was in response to some hawkish sounding headlines from the minutes. For example, "most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy." That view wasn't exactly surprising, however, considering remarks made by Fed Chair Powell after the meeting.
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Global growth worries, especially related to China, also kept stocks under pressure this week. China reported a batch of weaker than expected retail sales, industrial production, and fixed asset investment data for July, along with another decline in home prices.
The People's Bank of China, in response to weakening economic activity, lowered its one-year medium-term lending facility rate to 2.50% from 2.65% and lowered the seven-day reverse repurchase rate by ten basis points to 1.80%.
Bank stocks were a weak pocket in the market after a warning from Fitch Ratings that it might be forced to downgrade the ratings of dozens of additional banks. The warning came just a week after Moody's cut the ratings of ten small to mid-sized U.S. banks.
On the earnings front, Dow components Home Depot (HD) and Cisco (CSCO) were met with positive reactions to their reports while fellow Dow component Walmart (WMT) logged a decline after its earnings report. Target (TGT) and TJX Cos. (TJX) were also among the standout winners, along with Applied Materials (AMAT).
September EZTracker Newsletters come out Sunday, August 27th