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Your Capital Markets Snapshot: Equity Markets Trended Upwards

Last week, equity markets trended upwards, with the S&P 500 continuing to reach record highs, driven by confidence in a strong U.S. economy. Despite rising oil prices, yields, and geopolitical tensions, stocks rebounded after initially falling to start the week. The Consumer Price Index (CPI) report came in slightly above expectations, and Initial Jobless Claims hit a one-year high but may be the temporary result of impacts from Hurricane Helene and the Boeing strike. Bond yields rose, with the 10-year Treasury yield increasing to 4.08% from 3.98%, as markets begin to cool down on expectations of continued aggressive rate cuts from the Federal Reserve and react to strong economic data, such as the Atlanta Fed's Q3 GDP forecast being revised up to 3.2%.

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Your Capital Markets Snapshot: Markets Bouncing Around But Trending Down

An eventful week last week led to markets bouncing around but trending down for most of the week, resulting from increasing tensions in the Middle East and the East Coast port strike. After the strike tentatively ended late Thursday and a strong jobs report on Friday, we saw markets recover and post modest gains for the week. While the Federal Reserve seeks to balance its dual mandates of stable prices and full employment, last week may have some wondering if inflation concerns are truly in the rearview mirror as oil prices increased following Iran’s missile attack as well as US labor strikes becoming more common and leading to potentially higher wages. We will get inflation data next week that can help answer some of these questions, but for now the US economy appears to be on firm footing after posting the strongest job gains in the past six months paired with upward revisions to July and August’s job report numbers.

Your Capital Markets Snapshot: Equity Markets Saw Modest Gains

Last week, the equity markets saw modest gains, with the three major US indices rising between 0.6% to 1.0% due to positive economic data and a series of stimulus measures launched by the Chinese government. The Chinese stimulus measures led to significant gains in Chinese stocks, which in turn benefited several U.S. industries, such as materials and industrials. Additionally, the U.S. Federal Reserve's preferred inflation gauge showed further easing of price pressures, contributing to the positive market sentiment. Despite the growth in equity markets, it was another flat week for US fixed income markets while international bonds saw a modest 0.5% gain.

Your Capital Markets Snapshot: Federal Reserve's Cut Interest Rates

Last week, the Federal Reserve's cut interest rates by 50 basis points (bps) instead of the typical 25 bps, bringing the Federal Funds Rate to a range of 4.75%-5.00%. Chairman Powell explained they believed inflation will continue to decrease towards their 2% target and signs of a softening labor market supported their decision to begin cutting rates. While they explained more rate cuts would follow, they would not making timing/size commitments and explained they would closely monitor incoming data as they work to reduce their policy rate to a more neutral level. This decision was well-received by the equity markets, leading to new all-time highs for the S&P 500 and Dow Jones Industrial Average. The NASDAQ also saw a substantial increase, jumping 2.5% on Thursday following the Fed's announcement, but is still shy of its previous ATH.

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Your Capital Markets Snapshot: Capital Markets Experienced Increased Volatility

Last week, the capital markets experienced increased volatility due to concerns about a slowing economy and persistent inflation. Despite these challenges, stocks have shown strong gains and are near record highs. The latest inflation data revealed a month-over-month increase in core CPI, indicating that the fight against inflation is not yet over. However, the broader trend shows that inflation is on a downtrend, with core CPI levels returning to those seen in early 2021. The Federal Reserve is expected to start an extended phase of rate cuts at its upcoming meeting, which has brightened the outlook for monetary policy. Investors remain focused on inflation and labor market data and their implications for future Fed interest-rate moves.

Your Capital Markets Snapshot: U.S. Labor Market Was a Key Focus

Last week, the U.S. labor market was a key focus for investors, with the August nonfarm jobs report confirming signs of a weakening labor market. The unemployment rate dropped from 4.3% to 4.2%, but new jobs added showed a clear softening trend. Markets reacted to the soft jobs report with a continued sell-off, leading to a 4% decline in the S&P 500 from recent highs. The Federal Reserve's potential interest rate cuts became a focal point, with the probability of a 0.50% rate cut increasing due to the softening economic data. Treasury yields moved lower, and the yield curve un-inverted, reflecting the weaker labor market data and potential Fed rate cuts. Crude oil prices hit new lows for the year, driven by fears of a demand slowdown globally, particularly in China. Overall, markets have taken on a more defensive posture, with sectors like consumer staples and utilities outperforming amid economic uncertainty.

Your Capital Markets Snapshot: Major Indices Were Mostly Flat

Last week, the major indices were mostly flat or slightly down. Despite the volatility shock to start the month, all three indices managed to close August with slight positive gains. Economic data continues to support the potential of the Federal Reserve achieving a soft landing; last week, we saw an upward revision of Q2 GDP growth, the PCE report indicated moderating inflation, and initial unemployment claims came in below estimates. Following their recent interest rate cut, Eurozone countries continue to see inflation decrease as they reported inflation hitting its lowest level in nearly 3 years. Despite all this positive news, the S&P 500 ended the week just shy of a new all-time high while gold continued to push higher, which could be a sign of continued uncertainty in the short-term.

Your Capital Markets Snapshot: Capital Markets Were Largely in a Holding Pattern

Last week, the capital markets were largely in a holding pattern, awaiting insights from the Federal Reserve's annual symposium in Jackson Hole, Wyoming. The much-anticipated speech by Fed Chair Powell on Friday provided some key takeaways for investors, including the expectation that interest-rate cuts will commence in September. The Fed held its policy rate steady for over a year, but recent commentary suggests sufficient progress has been made on inflation to warrant a shift in policy to focus on employment. The markets responded positively to Powell's dovish message, with stocks rallying and Treasury yields falling in anticipation of the upcoming rate cuts. However, the path to rate cuts may not be consistent, with cuts and pauses interspersed over the coming months as the Fed closely monitors future economic releases and seeks to avoid further deterioration of labor markets and economic slowdown.

Your Capital Markets Snapshot: Stocks Posted One of Their Largest Weekly Gains

Stocks posted one of their largest weekly gains of the year following the pullback in recent weeks. Last week’s rally was driven by encouraging economic data, including continued reports of moderating inflation and a positive surprise on retail sales. Initial jobless claims came in below expectations for the second week in a row, which may suggest the recent increase in the unemployment rate could be due to an increasing labor pool size and not increasing layoffs. While data continues to suggest slowing growth of the economy, last week’s releases indicated the U.S. economy remains healthy and helped ease recession fears. As the September meeting draws nearer, expectations remain high for a potential interest rate cut by the Federal Reserve, with many hoping for a signal during Fed Chair Powell's speech this week at the Jackson Hole Symposium.

Your Capital Markets Snapshot: Mixed Performance Across Asset Classes

The first week of August saw mixed performance across asset classes and ended with a two-day selloff in the equity markets. Multiple data points suggest a softening labor market (nonfarm payrolls well below expectations, increasing unemployment rate triggered two recession indicators, above expectation initial jobless claims, and above expectation number of job openings) and a downward revision to GDP growth helped contribute to the downside volatility. Resulting from the increased uncertainty, we saw the VIX Index hit a one-year high breaking above 29 on Friday. While not guaranteed to repeat, historically large VIX spikes have signaled a near-term market bottom in stocks.

Your Capital Markets Snapshot: July Has Been a Month for Rotations

July has been a month for rotations as we have seen presidential candidate polling swing following the attempted shooting of former President Trump and subsequently President Biden’s exit of the 2024 presidential campaign. Further, we have seen value and small cap stocks begin and sustain short-term outperformance of their growth and large cap peers. With Vice President Harris poised as the favored Democratic nominee to take on former President Trump, election odds are looking like more of a coin flip than they were prior to Biden’s bowing out. This political uncertainty can be expected to add uncertainty to market outlooks ahead of the November election. This is to be expected as history has shown market uncertainty tends to increase leading into elections and subsequently decrease back to normal levels.

Your Capital Markets Snapshot: Stocks Swung Back and Forth

It was a wild week as stocks swung back and forth beginning with an early-week rally after the attempted shooting of Donald Trump followed by weakness in tech stocks after the week ended with a global IT outage. For a second week in a row, we saw small cap stocks outperform their large cap peers and value outperform growth. Expectations remain high for an upcoming rate cut by the Federal Reserve in September as economic data showed signs of consumer strength, with retail sales numbers surprised to the upside, and slack in the labor market, as initial and continuing jobless claims surprised to the upside.

Your Capital Markets Snapshot: Large Cap Equities Delivered Impressive Performance

Despite a short week and economic data showing signs of a slowing economy, large cap equities delivered impressiveperformance, primarily fueled by the tech sector. Both the S&P 500 and Nasdaq closed the week at record highs as did the tech giants AAPL, AMZN, GOOGL, META, and MSFT. While monthly job growth came in above estimates, the prior two months were revised down. The unemployment rate ticked up to 4.1%, its highest level since November 2021, with reported job openings exceeding expectations. Based on ISM data, the Manufacturing sector reported a contraction for the third consecutive month (and 19 of the last 20), while the Services/non-Manufacturing sector fell significantly from the prior month to its lowest level in 4 years and reported a contraction. Given signs of a softening economy, expectations for an upcoming Fed rate cut in September increased.

Your Capital Markets Snapshot: Equity Markets Experienced Mixed Week

The equity markets had a mixed week to close out the first half of the year; however, on a year-to-date basis, all three major equity indices have shown impressive gains. Economic news last week showed inflation continues to trend lower as the core Personal Consumption Expenditure (PCE) Index for May was reported in line with expectations with an annual gain at 2.6%.

Your Capital Markets Snapshot: Equity Markets Constrained Last Week

Mixed economic data kept the equity markets constrained last week moving into the final days of the second quarter. May retail sales figure came in below expectations with a gain of only 0.1%, while April’s retail sales figure was revised to a decline of 0.2%.

Your Capital Markets Snapshot: Key Inflation Data Below Expectations Last Week

Key inflation data came in below expectations last week, helping the Federal Reserve move towards their goal of lower inflation. The headline Consumer Price Indec (CPI) came in at an annualized rate of 3.3%, below economists’ estimates of 3.4%.

Your Capital Markets Snapshot: Mixed Picture of the Jobs Market Last Week

There was a mixed picture of the jobs market last week despite the upside surprise to the May Non- Farm Payroll report.

Your Capital Markets Snapshot: Three Indices Managed to Post Positive Returns

In a light week of economic releases, corporate earnings were the driver behind the market’s negative performance this week, but all three indices managed to post positive returns for the month.

Your Capital Markets Snapshot: Markets Were Mixed Last Week

The markets were mixed last week led by a surge in the technology sector due in part to a positive earnings report from chip maker Nvidia.

Your Capital Markets Snapshot: Equity Markets Saw Record Highs This Week

With a light week for economic releases, concerns over the U.S. job market were in focus as weekly jobless claims rose to their highest level since August with a gain of 231,000.

Your Capital Markets Snapshot: Concerns Over the U.S. Job Market

With a light week for economic releases, concerns over the U.S. job market were in focus as weekly jobless claims rose to their highest level since August with a gain of 231,000.

Your Capital Markets Snapshot: Federal Reserve Kept the Fed Funds Rate Unchanged

Economic data this week did not move as the Federal Reserve may have wished.

Your Capital Markets Snapshot: Preliminary First Quarter GDP Estimates Below Expectations

Economic data this week did not move as the Federal Reserve may have wished.

Your Capital Markets Snapshot: Equity Markets Down for the Third Week

The equity markets were down for the third week in a row on continued tensions in the Middle East and hawkish comments from Federal Reserve Chairman Jay Powell.

Your Capital Markets Snapshot: Pressure on the Markets this Week

Tensions in the Middle East and a stronger than expected Consumer Price Index (CPI) report put pressure on the markets this week.

Your Capital Markets Snapshot: Positive News on the Jobs Front

The second quarter started off with positive news on the jobs front as the March non-farm payroll report came in with a gain of 303,000 jobs which was well above expectations of 205,000.

Your Capital Markets Snapshot: A Bright Picture of the U.S. Economy

Data in the last week of the quarter painted a bright picture of the U.S. economy. The Federal Reserve’s preferred inflation metric, the Personal Consumption Expenditure (PCE) Index, came in as expected for February with an increase of 2.5% for the year.

Your Capital Markets Snapshot: The Federal Reserve’s “Dot-Plot” Back in the News

The Federal Reserve’s “dot-plot” was back in the news this week following the March FOMC meeting. While no rate cuts were announced at this meeting, the new pattern of expected Fed moves implies three cuts at some point in 2024.

Your Capital Markets Snapshot: Slight Pickup in Inflationary Pressures

Economic data showed a slight pickup in inflationary pressures which may keep the Fed on pause at their FOMC meeting this week. Both the Consumer Price Index (CPI) and the Producer Price Index (PPI) came in slightly higher than expected last week.

Your Capital Markets Snapshot: Equity Markets Close with a Loss

The equity markets could not hold on to their recent rally and closed with a loss this week. Friday’s better than expected job report pushed two of the major indices into record territory but then profit-taking brought stocks lower to end the week.

Your Capital Markets Snapshot: Equity Markets Reach Record Levels

Despite some mixed economic news this week, the equity markets continued to reach record levels. The Nasdaq and S&P 500 both closed at all-time highs on Friday, after ending February with their best monthly return in nine years.

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We are posting a “Special Edition of The Navigator – SVB Failure” by Daken Vanderburg, MassMutual Head of Investments. We depend on Daken for his wisdom and perspective at all times , and especially times like these, when dramatic events such as the recent bank failures can rattle our nerves and shake our confidence.

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