PAS Weekly Commentary

Nasdaq and S&P 500 break losing streak in week of gyrations

It was a generally good week for the mega-cap names and a relatively lackluster week for the broader market.

To wit: the market-cap weighted S&P 500 rose 0.8% this week while the Invesco S&P 500 Equal-Weight ETF, based on the S&P 500® Equal Weight Index, posted a fractional loss. The Russell 2000 was down 0.3% for the week and the S&P Midcap 400 Index was flat. The Nasdaq Composite gained 2.3% and the Dow Jones Industrial Average declined 0.4%.

With their gains this week, the S&P 500 and Nasdaq Composite broke a three-week losing streak.

There wasn't a lot of consistency in the trading action this week, which saw its share of gyrations in a week accented with light volume and big news items that included the July Existing Home Sales and New Home Sales reports, the preliminary Manufacturing and Services PMI readings for August, NVIDIA's earnings report, results from a large and diverse batch of retailers, and Fed Chair Powell's policy-oriented speech at the Jackson Hole Symposium.

In brief:

  • Existing home sales were slightly weaker than expected, impeded yet again by limited supply and affordability pressures from high mortgage rates.
  • New home sales were slightly stronger than expected, driven by sales of more moderately priced homes as higher building costs crimped the supply of lower-priced homes while higher mortgage rates contributed to affordability pressures across the spectrum.
  • The preliminary Manufacturing and Services PMI readings showed a deceleration in activity from July and an ongoing contraction in the manufacturing sector.
  • NVIDIA delivered another blowout earnings report, replete with much stronger than expected guidance, yet the stock struggled to hold its gains after the report.
  • The results from the retailers were a mixed bag but comments from Macy's about weakening consumer credit trends, and disappointing results and/or guidance from Dick's Sporting Goods, Dollar Tree Stores and Foot Locker that were attributed in part to inventory shrink (i.e., theft), overshadowed good news from other reporters.
  • Fed Chair Powell stuck by the Fed's 2.0% inflation target; he reiterated that the process of getting inflation back down to 2.0% still has a long way to go; and he acknowledged that the Fed will raise rates again if it is appropriate. Nothing he hasn't said before. What he didn't say is that the Fed is thinking about cutting rates, yet that omission wasn't a surprise either.

The best-performing sectors this week were information technology (+2.6%), consumer discretionary (+1.1%), and communication services (+1.0%). The commonality is that they all have mega-cap stocks under their roof. The energy sector (-1.4%) was the biggest decliner this week with oil prices fading some on continued concerns about China's weakening economy.

That weakening prompted the PBOC to cut its one-year loan prime rate by 10 basis points to 3.45% on Monday and officials to urge financial institutions to assist in stabilizing the stock market. On a related note, Reuters reported Friday that China is planning to lower the duty on stock trading by 50%. China's Shanghai Composite declined 0.6% on Friday and lost 2.2% for the week.

Separately, the Treasury market had its own gyrations this week. The 2-yr note yield saw a trading range that spanned from 4.92% to 5.10%. It settled the week at 5.05%, up 14 basis points for the week. The 10-yr note yield saw a trading range that spanned from 4.18% to 4.35%. It settled the week at 4.24%, down one basis point for the week.

The U.S. Dollar Index was up 0.8% for the week to 104.19.

  • Nasdaq Composite: +2.3% for the week / +29.8% YTD
  • S&P 500: +0.8% for the week / +14.7% YTD
  • Russell 2000: -0.3% for the week / +5.2% YTD
  • S&P Midcap 400: flat for the week / +6.1% YTD
  • Dow Jones Industrial Average: -0.4% for the week / +3.6% YTD

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Data and rates used were indicative of market conditions as of the date shown and compiled by Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

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2023-160600 (Exp. 11/23)