Weekly Market Roundup | Week of August 28

Stocks & Bonds

08/28/2023

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The S&P rebounded 0.8% last week following a three week losing streak. The Technology sector drove gains, climbing 2.6%, while Energy lagged by falling 1.4%.
Purchasing Managers Indices (PMIs) for Manufacturing in both the US and Europe were below expectations, showing a continued slowing in global manufacturing activity.
NVDA reported a large beat across earnings and revenue for Q2, while forward guidance was also well above expectations. However, the ramp up prior to the earnings report appeared to reflect that good news was already priced in, with the stock falling the day after the release.
Fed Chair Jerome Powell’s speech at Jackson Hole was taken as slightly hawkish, as he emphasized inflation still remains too high and that they would be prepared to raise rates further if needed. He also reiterated the need to keep policy restrictive for some time.
Labor market data reported throughout this week will be monitored closely, with the jobs report expecting 168,000 jobs added in the month of August, down from 187,000 last month.

Chairman Powell’s Jackson Hole Speech Sees Rate Expectations Test 2023 Highs

The expected December 2023 secured overnight financing rate (SOFR), a proxy used for the fed funds rate, moved slightly higher last week to test the 2023 highs after Fed Chair Powell’s Jackson Hole speech.
This has caused the yield curve to invert further from the recent levels, with the policy sensitive 2-year yield rising more than the 10-year yield as a signal the market took Powell as hawkish.
The implications for this is that the market has still not started to price an environment of increased recession risk, which would typically see the 2-year yield fall faster than 10-year yield as Fed cuts get priced into the curve, causing the curve to steepen towards zero.