Hello, this is Tom Jalics, Chief Investment Strategist at Fifth Third Bank
Domestic equities finished their worst week in eighteen months as labor market related uncertainty sparked economic slowdown fears. The S&P 500 Index was down 4.2% for the week and the Nasdaq Composite closed the week down 5.8%. The Dow Jones Industrial Average finished the week 2.9% lower.
Treasury yields were down last week with the 10-year U.S. Treasury note ending the week down nineteen basis points to 3.71% and the 2-year U.S. Treasury note down twenty-seven basis points ending the week at 3.65%. The 2-year/10-year U.S. Treasury yield curve steepened and after more than two years, finished the week normally sloped by six basis points. Gold finished the week 0.2% lower, ending the week at $2,497/ounce. West Texas Intermediate (WTI) crude oil was down by 5.8% for the week, ending the week at $67.67/barrel.
Friday's August nonfarm jobs report was the most anticipated economic data point of the week. The jobs report pointed to additional signs of a softening in the U.S. labor market and added to volatility in the financial markets. August nonfarm payrolls increased by 142,000, less than an expected 165,000 job gain. Additionally, July nonfarm payrolls were revised lower to a gain of 89,000 jobs from 114,000 jobs, and June nonfarm payrolls were revised lower to a gain of 118,000 jobs from 179,000 jobs. The unemployment rate fell to 4.2% from 4.3%. The report confirms that there is a slowdown in hiring activity that should translate into a slowdown for the economy, but the report continues to highlight aggregate payroll gains, not payroll losses, which should translate to continued economic growth.
On a more positive note, second quarter earnings season for the S&P 500 is largely complete with the largest domestic companies posting solid earnings growth, suggesting strength and resiliency in the domestic economy. More than 99% of the companies in the S&P 500 have reported actual results for the second quarter of 2024. According to FactSet, the blended earnings growth rate for the second quarter is 11.3% today, compared to an earnings growth rate of 8.9% at the end of the second quarter. The second quarter will mark the highest year-over-year earnings growth rate reported by the index since second quarter 2021. It will also mark the fourth consecutive quarter of year-over-year earnings growth for the index.
In the week ahead, investors will be digesting a slew of both economic and corporate earnings data. On Wednesday, the August report of the Consumer Price Index (CPI) will give market participants one last look at inflation before the Federal Reserve next meets on September 18th. Wholesale pricing, consumer credit, small business optimism, and initial jobless claims are among the economic data points scheduled for release this week. Apple is expected to unveil its new Artificial Intelligence powered iPhone at a product launch event on Monday. Nvidia, Walmart, and Advanced Micro Devices will participate in a Goldman Sachs technology event throughout the week. Finally, earnings reports from GameStop, Oracle, and Adobe will be released this week.
As always, we will be watching and reporting to you next week. Thank you.
