Weekly Stock Market Recap
Luke Abbott, CFA
Helping professionals across LATAM make informed investment decisions for their individual financial goals.
Last week, the Dow Jones made headlines on Monday by surpassing the record it set back in mid-July, followed by the S&P 500 climbing to new heights on Thursday. This boost came on the back of the first interest rate cut since March 2020.
All the major indexes saw healthy gains of around 1.5% for the week, with the NASDAQ now sitting just 4% shy of its all-time high.
FED Cuts 50 Basis Points
In line with expectations, the U.S. Federal Reserve announced a 50 basis point cut to its key lending rate on Wednesday.
While some anticipated a smaller 25-point reduction, the Fed opted for a more aggressive approach, with 11 of the 12 voting members backing the move. This leaves the Fed funds rate between 4.75% and 5.00%, and further cuts are anticipated in the upcoming November and December meetings.
Market Response to the Fed’s Move.
Thursday saw the biggest action following the Fed’s rate cut, with the NASDAQ jumping 2.5%, the S&P 500 climbing 1.7%, and the Dow rising 1.3%. In the bond market, the 10-year Treasury yield ended the week at 3.73%. While this marks a rise for the week, it’s a sharp drop from the year-to-date peak of 4.70% reached in late April.
Yield Curve Back to Normal
A key bond market indicator that often signals a looming recession has shifted. Since mid-2022, the 2-year U.S. Treasury yield had been higher than the 10-year yield—an uncommon scenario known as a yield curve inversion. However, on September 4, the 2-year yield dipped back below the 10-year yield, where it remains. As of Friday, the 2-year yield closed at 3.58%, while the 10-year stood at 3.73%.
Inflation Watch: PCE Data Coming
Looking ahead, Friday’s report on the Personal Consumption Expenditures (PCE) Price Index will provide fresh insights into inflation trends. The last report showed an annual rise of 2.6%, excluding volatile energy and food prices. We’ll soon find out if this cooling trend continued into August.
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Luke Abbott, CFA