August jobs report boosts investor hope of Fed rate pause
Sept.1, 2023
PHOTO: MICHAEL M. SANTIAGO/GETTY IMAGES
The S&P 500 rose Friday, finishing its best weekly performance since June.
The broad index gained 0.2%. The Dow Jones Industrial Average added roughly 115 points, or 0.3%. The Nasdaq Composite eased less than 0.1%.
For the week, the S&P 500 advanced 2.5%. The Dow and Nasdaq rallied 1.4% and 3.2%, respectively, each notching their best weeks since July.
Investors parsed the August jobs report ahead of a holiday weekend. All three major indexes initially rose Friday after the report suggested the economy may be cooling enough for the Federal Reserve to hold off on further interest-rate increases. The unemployment rate jumped to 3.8% in August. Economists had expected it to hold steady at 3.5%. Average hourly earnings, meanwhile, rose 4.3% in August from a year earlier, less than in July and lower than forecast.
“Everything’s keyed into numbers related to inflation and ultimately what the path of the Fed is going to be,” said Leslie Thompson, chief investment officer of Spectrum Wealth Management.
The indexes came off intraday highs as declines in megacap tech stocks weighed on performance. Tesla fell 5.1% after it unveiled a new vehicle with a steeper price tag than analysts expected. Nvidia pulled back 1.7% after rival chip maker Broadcom forecast revenue for the current quarter just in line with analyst expectations.
In the bond market Friday, the benchmark 10-year U.S. Treasury yield swung, ultimately rising to 4.173% from 4.090% on Thursday. Yields rise as prices fall.
Market participants attributed Friday’s shaky trading to lower activity around the holidays as investors take time off. U.S. markets are closed Monday for the Labor Day holiday.
“Trades in a thinner market can get exaggerated,” said Jack McIntyre, portfolio manager for Brandywine Global.
Shares of entertainment companies fell Friday after a dispute between Charter and Walt Disney created concerns about the future of the cable-television business model. Shares of Charter eased 3.6% and Disney lost 2.4%. Warner Bros. Discovery, Paramount Global, Fox and Comcast also pulled back.
Dell Technologies rallied 21% after the company reported better-than-expected earnings and issued a robust outlook.
Consumer-staples stocks were the worst performing sector of the S&P 500 on Friday. Walgreens Boots Alliance declined 7.4% after the pharmacy operator’s chief executive stepped down. Stocks are coming off a weak month of trading, even with a late-August rally. The indexes took a breather from their year-to-date climb as investors assessed the sustainability of stocks’ ascent and weighed competing high yields from safer, cash-like instruments.
September is historically the worst month for U.S. stocks. The S&P 500 has lost an average of 1.1% in September dating back to 1928, according to Dow Jones Market Data.
“We’re getting through that summer lull. Seasonality isn’t playing in our favor this coming month,” said Jake Jolly, head of investment analysis at Bank of New York Mellon’s investment management division.
Spectrum Wealth Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Additional information about Spectrum’s investment advisory services is found in Form ADV Part 2, which is available upon request. The information presented is for educational and illustrative purposes only and does not constitute tax, legal, or investment advice. Tax and legal counsel should be engaged before taking any action. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchasing or selling any security.