Stock Market Today

Oh boy, these last few days – Stocks fell sharply, Dow closes down 600 points, Nasdaq enters correction after weak jobs report.

Today, we dig into what triggered this sudden market downturn and where things stand today.

What Happened in the Markets?

?The stock market took a significant dive this week, with the Dow plunging 800 points and the Nasdaq officially entering correction territory. This sharp downturn comes after a surprisingly weak jobs report and weaker manufacturing economic data.

It is important to note, Wednesday's sell-off was triggered by a confluence of factors:?an overbought market,?elevated earnings expectations,?and the historically weak performance of equities during this period.?Consequently,?this pullback has not been entirely unexpected by investors.

?The S&P 500, which had been steadily climbing over the past few months, experienced its worst day since 2022 on July 24th. The negative trend continued this week, with losses of 2%, 1.4% on Tuesday, and a steep 2.6% drop today, before recovering slightly to close at -1.84%. Despite these recent setbacks, the index is still up 12.73% for the year.

Bond yields also declined, with the 10-year Treasury yield dropping 6 basis points to 3.97%. Commodity prices followed suit, with oil falling to $76.91 per barrel and gold decreasing by 0.2% to $2,443.10 per ounce.

Investors are now closely watching for signs of market stabilization as they grapple with the implications of these rapid changes.

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Why Did This Move Happen?

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Growth fears weighted on US equities on Thursday and Friday, as investors digested weaker labor market and manufacturing economic data. New data showed fewer jobs were created than expected, and manufacturing activity is also weakening. This is bad news because investors were hoping for a "soft landing" for the economy – a slowdown without a recession. But now, they're starting to think a "hard landing" – a deeper recession – might be more likely.

To make things worse, many companies are reporting disappointing earnings. This means they're making less money than expected. Some companies might have cut costs too much to meet their profit goals, which could hurt them in the long run.

All of this has made investors nervous, and they're selling stocks. Basically, the economy isn't looking as good as people hoped, and companies aren't doing as well as expected, so the stock market is going down.

In advance of Friday’s critical nonfarm payrolls report, initial jobless claims touched their highest level in nearly a year. The US added 114,000 jobs in July, below estimates of 175,000, and the unemployment rate unexpectedly rose to 4.3%. Additionally, July ISM Manufacturing data fell further into contraction territory to 46.8 vs. consensus 48.9. Respondents highlighted depressed business conditions, geopolitical uncertainty, and unfavorable changes in consumer activity.

With nearly 70% of S&P 500 companies having now reported, only 47% have beaten revenue expectations, while 58% have managed positive earnings surprises. The setup points to potential concerns that corporate management may have reduced costs to meet earnings and margin expectations, while negative earnings revisions breadth and less-positive forward earnings guidance have caused some investors to question the durability of earnings growth. Intel and Amazon's weak earnings reports also contributed to today's stock market decline.

How Does the Move Relate to Our Tactical Positioning?

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I recently implemented portfolio adjustments, involving both the elimination and addition of certain positions. This proactive measure was taken in anticipation of potential market volatility, commonly observed during the fall due to tax-loss selling.

While the recent manufacturing data was unexpected, the confluence of factors such as corporate earnings estimates, the upcoming election, and historical seasonal trends indicated an increased likelihood of market turbulence.

These market conditions present an opportunity to optimize cash allocation, particularly given recent inflows from both new and existing clients. The strategic addition of energy exposure to the portfolio earlier this year was intended to provide a degree of downside protection in a potentially volatile market environment.

Market fluctuations are a natural part of the investment landscape. While it’s understandable to experience concern during periods of volatility, panic selling is rarely the optimal strategy. History has shown that markets tend to recover over time.

Remember, investing is a long-term endeavor. Short-term fluctuations should not overshadow your overall financial goals. By maintaining a disciplined investment approach and staying focused on the bigger picture, you can weather market storms and emerge stronger.

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Natalia Ivanova

Founder and CEO

Financial Planning Specialist

NewGen Wealth Creation LLC | Wealth Management

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Every day is dedicated to honoring the trust and faith my clients have placed in me.?I?listen to their concerns, understand their needs and continuously work to find solutions and structures that help meet their goals.

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NewGen Wealth Creation LLC is an Investment Adviser registered with the Securities & Exchange Commission (SEC), principally located in the state of Puerto Rico. All views, expressions, and opinions included in this communication are subject to change. Please contact us if there is any change in your financial situation, needs, goals or objectives. The information contained in this electronic communication is intended only for the use of the recipient. For your privacy and security, do not include sensitive information using emails that are not secured.

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NewGen Wealth Creation LLC is an Investment Adviser offering services in Puerto Rico and in other jurisdictions where it is exempt from registration. All views, expressions, and opinions included in this communication are subject to change. Please contact us if there is any change in your financial situation, needs, goals or objectives. The information contained in this electronic communication is intended only for the use of the recipient. For your privacy and security, do not include sensitive information using emails that are not secured.

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Risk Considerations: There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, investors can lose money.?