Weekly Stock Market Recap

U.S. stock markets bounced back impressively this past week, with major indexes gaining between 3% and 6%, almost erasing the sharp losses from the previous week. The tech sector, in particular, has been driving much of September's market volatility. After a rough start to the month with a 7% drop, tech stocks made a strong comeback, matching those losses with a 7% gain this week.

Inflation Slows Down??

A key highlight that boosted stocks was a cooling inflation report. The Consumer Price Index showed prices rising at an annual rate of 2.5% in August, down from 2.9% in July.

This is the lowest inflation rate since February 2021, and it’s one of the last pieces of data the Federal Reserve will consider before its much-anticipated meeting this Wednesday, where interest rate decisions are on the agenda.

Bond Yields Take a Dive

U.S. Treasury bond yields continued their recent slide, with the 10-year yield dropping to 3.66%, the lowest since June 2023.

This decline reflects market expectations of an imminent rate cut from the Fed, with yields pulling back from the highs seen earlier this year, when they reached 4.70% in April.

Consumer Confidence on the Rise

Consumers are feeling more optimistic, with the University of Michigan's Consumer Sentiment Index ticking up to 69.0 in its preliminary September reading, from 67.9 in August. This marks the second consecutive month of improvement after five months of declining sentiment. Notably, consumers’ inflation expectations for the next year remain at their lowest point since December 2020.

Gold Hits a New Record

Gold is shining brighter than ever, hitting a new all-time high of over $2,600 per ounce. This extends the metal's upward streak, which began last month when it first crossed the $2,500 mark. At the start of the year, gold was trading around $2,060, making this a significant move for the safe-haven asset.

Fed Policy Pivot Expected

Looking ahead, all eyes are on the Federal Reserve’s upcoming two-day meeting, set to conclude on Wednesday. It’s widely anticipated that the Fed will announce its first interest rate cut since early 2020. Fed Chair Jerome Powell hinted at this shift during a speech on August 23, noting that "the time has come for policy to adjust." What remains uncertain is the size of the cut—whether it will be a modest 0.25% or a more substantial 0.50%.

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Luke Abbott, CFA