Economic Softness Sparks Market Optimism:
Falling bond yields, spurred by weak economic data, helped lift stocks to weekly gains as investors sought higher returns in equities. This development brought relief to market participants and contributed to the overall positive performance of stocks last week.
Over the last month, The Dow Jones Industrial Average returned –1.88%, while the S&P 500 returned -0.23%. The Nasdaq Composite Index returned 0.79%.
Source: Charles Schwab & Co, Inc.
Stocks Rise on Slowing Economy
Investor sentiment turned positive last week as signs of economic softness were interpreted as reason for the Fed to hold off on further rate hikes. A downward revision of Q2 economic growth and fresh signs of a cooling labor market reversed the recent rise in bond yield. They helped trigger a stock bounce back following Fed Chair Powell’s speech at Jackson Hole the previous Friday.
It wasn’t all about bad news being viewed as good news, though. A series of solid earnings reports, an announcement by one mega-cap tech name introducing pricing for its AI tools, and fresh inflation data — in-line with market expectations–further boosted enthusiasm for stocks.
Labor Shows Signs of Cooling
Despite historic monetary tightening, the labor market has exhibited remarkable resilience, but last week’s employment data showed a cooling trend.
Job openings declined to their lowest level since March 2021, though they remained above pre-pandemic levels. Meanwhile, a survey of private sector hiring showed a slowdown in hiring, with employers adding 177,000 jobs in August–below the 371,000 added in July and short of economists’ forecast of 200,000.1,2
Finally, the government’s monthly employment report showed the number of nonfarm payroll gains continued to decelerate in August, while June and July estimates were revised lower by 110,000.3
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
1The Wall Street Journal, August 29, 2023
2CNBC, August 30, 2023
3The Wall Street Journal, September 1, 2023
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