Stocks closed the week mixed, with the Dow Jones Industrial Average (DJIA) down 0.32%, losing ground due to macroeconomic concerns. Meanwhile, tech megacaps’ outperformance lifted the S&P 500 (SPX) and the Nasdaq-100 (NDX) to 0.33% and 1.01% respective weekly gains, with the large-tech benchmark especially lifted by a surge in Broadcom (AVGO) and Alphabet (GOOGL).
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
After a shaky start to the holiday-shortened week on Tuesday and a new all-time high on Thursday, stocks closed Friday on a weak note after the August jobs report confirmed that the labor market is visibly slowing down.
The economy added just 22,000 jobs last month – less than a third of what was expected – and the unemployment rate rose from 4.2% to 4.3%. This added to July’s below-trend growth and a stark revision for June that moved job growth into negative territory, marking three months of slowing job growth and showing the U.S. job market is weakening. The Federal Reserve apparently saw it coming, as outlined in Powell’s Jackson Hole speech. However, the data confirming that economic weakness now demands a rate reduction despite still elevated inflation did little to cheer the markets up.
A September rate cut was already fully priced in before the jobs report release, so the weak data did not help sentiment – instead, it raised worries that the economy may be weaker than seen on the surface. Other signs of economic weakness – such as the sixth straight month of manufacturing contraction and the Fed’s Beige Book report pointing to below-average GDP growth ahead – added fuel to the fire, sparking speculation about a potential “jumbo cut” of 50 bps. With a rate cut impending anyway, reasons for the Fed move came to the forefront – and with those being negative (weak economy) rather than positive (lower inflation), stocks wobbled on fears for an earnings hit.
The Federal Reserve has two mandates – maximum employment and stable prices. After a not-so-surprising revelation about the first, investors are about to receive a wide set of data on the second mandate’s trends, with both consumer price index (CPI) and producer price index (PPI) inflation figures coming out this week. This incoming inflation data will be closely scrutinized for signs of stubborn price pressures or easing trends, which could determine whether policymakers proceed with a modest rate cut or opt for more aggressive easing to support the economy.
Three Economic Reports
Here are three key economic reports that could affect your portfolio this week. For a full listing of additional economic reports, check out the TipRanks Economic Calendar.
» August Producer Price Index (PPI) and PPI ex. Food and Energy – Wednesday, 09/10 – This report reflects input costs for producers and manufacturers. Since the PPI measures the cost of producing consumer goods – which ultimately affects retail prices – it is viewed as a leading indicator of inflationary pressures. As such, it often foreshadows the following month’s CPI and plays a critical role in shaping inflation expectations among policymakers.
» August CPI and CPI ex. Food and Energy (Core CPI) – Thursday, 09/11 – The Consumer Price Index (CPI) is one of the two key measures of inflation (the other being the Personal Consumption Expenditures index, or PCE). Policymakers, businesses, and consumers closely monitor the CPI report, as it reflects price trends across the economy, shapes consumer spending and business sentiment, and directly influences the Federal Reserve’s interest rate decisions.
» September Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectations (preliminary readings) – Friday, 09/12 – These reports summarize consumer confidence and long-term inflation expectations in the United States. Consumer confidence impacts spending, which accounts for roughly 70% of U.S. GDP. The inflation expectations component is closely monitored by policymakers and is factored into the Federal Reserve’s Index of Inflation Expectations.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.