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THE WEEK ON WALL STREET
A comprehensive sell-off on Friday following comments by Fed Chair Jerome Powell drove stocks to losses for the week.
The Dow Jones Industrial Average tumbled 4.22%, while the Standard & Poor’s 500 dropped 4.04%. The Nasdaq Composite index fell 4.44% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.10%.1,2,3
UNDER PRESSURE
Stocks dropped on Friday following Powell's remarks reiterating the Fed's inflation-fighting resolve. While his comments did not break new ground, markets reacted severely, perhaps on worries that interest rate hikes may continue into next year.
After starting the week sharply lower on renewed rising interest rates and economic slowdown fears, markets staged a modest turnaround beginning mid-week. Stocks rallied on Thursday, sparked by a revised Gross Domestic Product estimate showing the economy's shrinking less than initially estimated. Thursday's rally also got a boost from regional Federal Reserve Bank presidents, who suggested future rate hikes may be in line with market expectations.
POWELL AT JACKSON HOLE
In his much-anticipated speech at the Jackson Hole Economic Symposium, Powell unflinchingly reaffirmed the Fed's commitment to raising rates to lower inflation, even if it results in causing pain to individuals and businesses.
Wall Street focused on Powell's presentation in the hope it might provide greater clarity on future Fed direction, though his remarks ultimately went no further than restating past communications. Powell commented, "We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to two percent." This statement may have put to rest any thoughts that the Fed would soon pivot on rate hikes. 4
BY THE NUMBER$
MUST BE DONE - The last time the “normal retirement age” for monthly Social Security benefits was raised was in 1983. 75% of 2,545 registered voters surveyed in April 2022 support raising the “normal retirement age” in order to protect the financial solvency of the program (source: Program for Public Consultation).
SPENDING MONEY YOU DON’T HAVE - As of 6/30/2003, credit card debt in the US was almost 3 times the size of student loan debt, i.e., $690 billion to $240 billion. By 6/30/2010, credit card debt ($740 billion) was smaller than student loan debt ($760 billion). As of 6/30/2022, credit card debt ($890 billion) has been overwhelmed by student loan debt ($1.59 trillion) (source: Federal Reserve Bank of New York). 5
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Consumer Confidence. Job Openings and Turnover Survey (JOLTS).
Wednesday: Automated Data Processing (ADP).
Thursday: Jobless Claims. Institute for Supply Management (ISM) Manufacturing Index.
Friday: Employment Situation. Factory Orders.
Source: Econoday, August 26, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Tuesday: Best Buy Co., Inc. (BBY), HP, Inc. (HPQ).
Thursday: Broadcom, Inc. (AVGO), Hormel Foods Corporation (HRL).
Source: Zacks, August 26, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
THE WEEKLY RIDDLE
What can run but never walks, has a mouth but never eats, has a head but never thinks, and has a bed but never sleeps?
LAST WEEK’S RIDDLE: I am in the center of gravity, and part of every victory. I am clearly seen in the midst of a river. I could name three who are in love with me and have three associates in vice. What am I?
ANSWER: The letter "V."
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