Stocks Raise White Flag to Bad News:
Stocks retreated last week as bond yields increased following the Treasury’s announcement indicating “a larger-than-expected funding need” and a downgrade in the federal government’s debt rating.
Over the last month, The Dow Jones Industrial Average returned 4.57%, while the S&P 500 returned 2.29%. The Nasdaq Composite Index returned 2.03%.
Stocks struggled as investor sentiment turned cautious amid rising bond yields. Markets were rattled initially by news that the Treasury raised its borrowing requirement for the third quarter by more than a quarter of a trillion dollars and on news that the Bank of Japan announced it would allow bond yields to rise after years of capping them.
Rising yields continued to pressure stocks in the wake of a surprise rating downgrade of U.S. government debt by a major credit rating agency due to its belief in expected fiscal deterioration over the next three years.
Stocks rebounded Friday morning, rising on modest employment data only to reverse and add to the week’s losses.
Mixed Signals from the Labor Market
Fresh employment data last week gave some conflicting signals about the labor market. A new JOLTS (Job Openings and Turnover Survey) report showed a small decline in job openings and layoffs in June, leaving 1.6 job openings for each available worker.1
Automated Data Processing’s (ADP) employment report reflected strong private sector hiring with a 324,000 increase in jobs, exceeding the consensus forecast of a 175,000 gain.2
The government’s monthly employment report saw a cooling in hiring as employers added 187,000 jobs in July. This was slower than seen in the first six months but enough to shave the unemployment rate from 3.6% to 3.5%.3
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, August 1, 2023
2CNBC, August 2, 2023
3The Wall Street Journal, August 4, 2023
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