Home / Research / The Long and Short of it, week ending 25 Aug 2023

The Long and Short of it, week ending 25 Aug 2023

Posted: 31 August, 2023

Topic: Telecoms , Financials , Basic Materials , Energy , Industrials , Technology

Publication Type: Market Commentaries

Stock markets rose last week, with the 2 of the 3 major market indexes registering gains with somewhat large disparity between index returns. Uncertainty ruled early week trading with investor awaiting Nvidia’s earnings report Wednesday (after the close) and Fed Chair Powell’s Jackson Hole speech Friday. Macy’s poor earnings report Tuesday, adding to concerns regarding consumer strength, helped pressure markets lower. Wednesday’s much better-than-expected Toll Brothers’ results (indicating surprisingly strong home building strength despite the high level of mortgage rates) along with generally positive Nvidia expectations pushed all 3 index levels at least ½ percent higher. Though Nvidia’s earnings report beat expectations (sending the stock almost 10% higher after hours Wednesday), markets fell more than 1% Thursday (Nvidia ended the day practically unchanged), besieged by growing concerns of the wherewithal of the economy follow much weaker-than-expected durable goods orders. Lower-than-expected jobless claims, indicating a still-resilient job market, added to those concerns by increasing expectations of continued Fed tight monetary policies. Powell’s comments Friday overall appeared to buoy markets, leaving investors with expectations the Fed would remain vigilant in its fight against inflation but act with caution. 10-year Treasury rates, reflecting investor uncertainty early last week, rose noticeably Tuesday only to fall sharply Wednesday to end the week about 2bps lower. For the week, the S&P 500 Index increased 0.8% to 4,405.71, the Nasdaq Composite Index climbed 2.3% to 13,590.65, the Dow Jones Industrial Average decreased 0.5% to 34,346.96, the 10-year U.S. Treasury rate decreased 2bps to 4.23% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.8%.

European stock indexes moved higher last week. The move higher was mainly prompted by noticeably weak euro zone and U.K. business activity increasing expectations of lower peak rates and by Chinese stimulus measures seeking to buoy, in particular, China’s faltering property market. A profit warning by a U.K. homebuilder combined with still-declining factory activity increased expectations of less aggressive BoE monetary policy going forward, weakening the British pound and moving 10-year Gilt rates sharply lower, pushing the FTSE 100 Index higher. Similarly, weaker-than-expected euro zone business activity worked to increase expectation of an ECB rate-hike pause, buoying euro zone stock prices. The STOXX 600 Index also benefited from larger exposure to tech stocks (than the FTSE 100 Index), helping move the index higher. For the week, the STOXX 600 Index increased 0.7% to 451.4, the FTSE 100 Index rose 1.1% to 7,338.58, the 10-year Gilt rate fell 19bps to 4.48%, the 10-year Bund rate decreased 6bps to 2.56% and the British pound and euro weakened 1.2% and 0.7%, respectively, both versus the U.S. dollar.