Market Recap Week of Aug. 21 - Aug. 25, 2023

Gordon Achtermann |

Market Recap

Week of Aug. 21 - Aug. 25, 2023


The S&P 500 rebounded this week after three straight losses as traders assess the latest remarks by Federal Reserve Chair Jerome Powell and anticipate official jobs data for August due next Friday.

The benchmark index ended Friday's session at 4,405.71, up from last week's close of 4,369.71.

The Federal Open Market Committee won't shy away from tightening monetary policy further if required as it seeks to bring inflation down to its 2% target, Powell said Friday in prepared remarks at the Jackson Hole symposium in Wyoming.

"We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective," Powell said. Outside of a pause in June, the FOMC has increased rates at each of its meetings since March 2022 in a bid to combat inflation.

The Fed chair's comments, however, were widely anticipated, and some believe the rate-hike cycle is nearing an end. (I certainly hope so!) Traders now put the odds of an interest rate increase in September at about 20%, little changed from their stance prior to Powell's speech. (I agree with that probability, only because there's a chance they will continue to be stupid about this.)

The University of Michigan Surveys of Consumers Friday showed US consumer sentiment declined more than projected in August as year-ahead inflation expectations edged higher. A weekly report by the Mortgage Bankers Association showed Wednesday that mortgage rates on conforming loan balances reached their highest level since December 2000, dragging loan demand for home purchases to the lowest point since 1995.

Among sectors, technology led the weekly gainers, rising 2.6%, with the help from a 6.3% increase in chip giant Nvidia (NVDA). The company delivered solid fiscal Q2 results and projected strong sequential revenue growth led by its data center business.

Xbox owner Microsoft (MSFT) said it will restructure its proposed acquisition of videogame maker Activision Blizzard (ATVI) in a bid to address the UK regulator's concerns regarding the deal's impact on cloud game streaming.

Consumer discretionary was the second-best performer for the week, up 1.1%. Lowe's (LOW) rose after the home-improvement retailer maintained its full-year outlook despite reporting lower fiscal Q2 results. Bath & Body Works (BBWI) fell 4.6% as the personal care and home fragrance retailer narrowed its fiscal 2023 sales outlook as its Q2 results declined. Sporting goods retailer Dick's Sporting Goods (DKS) slashed its full-year earnings outlook after reporting an uptick in retail theft and slow sales in its outdoor category.

Consumer staples slipped 0.8%, hit mainly by a 14% plunge in Dollar Tree (DLTR). The discount retailer tightened its full-year earnings outlook despite delivering better-than-expected quarterly results.

Energy posted the steepest decline for the week, down 1.4%.

In financials, S&P Global Ratings on Monday lowered its long-term issuer credit ratings on several banks, including KeyCorp (KEY) and Comerica (CMA), and revised its outlook for multiple lenders, citing "tough" operating conditions.

Industrials were up 0.3% for the week, even as planemaker Boeing (BA) lost 1.4%. A defect in the bulkhead of some of the company's aircraft will likely result in delays for 737 Max deliveries.

Health care ticked 0.1% lower as a 10% gain in Moderna (MRNA) was offset by an 11% decline by Insulet (PODD).

Communication services rose 1%, real estate advanced 0.7%, and utilities added 0.3%. Financials and materials were little changed.

Some of the major earnings scheduled for next week include UBS Group (UBS), Hewlett Packard (HPE), HP (HPQ), Salesforce (CRM), Dollar General (DG), Brown-Forman (BF.ABF.B), and J. M. Smucker (SJM).

On the economic front, next week's calendar also includes the official second estimate for Q2 US gross domestic product and the consumer spending report for July, along with the Institute for Supply Management's manufacturing sector report for August. Pending home sales data for July and two key home price reports for June are also slated for next week.