Summer Ends on a Gloomy Note for Stocks:
Stocks suffered significant losses last week as rising bond yields and concerns about a possible government shutdown dampened investor sentiment. Technology stocks were hit especially hard, bearing the brunt of the retreat.
Over the last month, The Dow Jones Industrial Average returned –1.03%, while the S&P 500 returned –1.54%. The Nasdaq Composite Index returned –2.11%.
Source: Charles Schwab & Co, Inc.
Investor sentiment took a decidedly negative turn last week when investors were caught off-guard by the Fed signaling another potential rate hike this year, upending hopes that the Fed might finish its current rate-hike cycle.
Stocks declined sharply following the Federal Open Market Committee (FOMC) announcement and continued to fall the following day as bond yields spiked. The 10-year Treasury yield hit 4.48% on Thursday, touching its highest point in more than 15 years.1
Stocks also reacted to news that the House of Representatives went into recess on Thursday, increasing the prospect of a government shutdown. The sell-off cooled on Friday, adding only incrementally to the week’s accumulated losses.
Fed Signals Another Rate Hike
As expected, the Fed held interest rates steady but surprised many investors by signaling another rate hike before year-end and suggesting that rates may need to remain high through 2024. In his post-announcement press conference, Fed Chair Powell remarked the inflation battle would continue, and upcoming economic data would inform the FOMC’s future rate hike decision.
In their economic projections, 12 of 19 Fed officials expect to raise rates once more this year (the FOMC meets again on October 31-November 1 and again in December). The Fed also lowered their unemployment projection from their June estimate and revised their projection for annual core inflation to 3.7% in the fourth quarter, down from June’s 3.9% forecast.2
This Week: Key Economic Data
Source: Bloomberg Finance L.P.
This Week: Companies Reporting Earnings
At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.
Chief Investment Officer
Concord Asset Management
Footnotes and Sources
1CNBC, September 21, 2023
2The Wall Street Journal, September 23, 2023
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