Markets “In a Nutshell” for September 11, 2023
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 0.70%, the S&P 500 was down 1.30%, and the NASDAQ fell 1.90%. Foreign stocks (MSCI EAFE) were also down, falling 1.30%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.26%. (Data source: Wall Street Journal)
What the Market is Paying Attention To
Markets have been up and down since the end of July after a strong start to the year. There are two main factors that have been driving market movement which are the labor market and inflation. A couple of weeks ago we saw labor market data softening which moved rates lower and stocks higher. Last week the opposite happened as rates ticked back up and markets dipped on healthy jobs data. Employment and inflation will continue to drive the market as these are the two things the Fed will look to as far as rate hikes and rate cuts go. A fresh CPI report will also be released this week which could move markets up or down depending on the data.
Rates and The Fed
The yield curve continues to steepen as the Fed tightening seems to be close to being over if not so yet. The 2-year and 10-year yield curve continues to be inverted but not as much as in June. The 2-year yield spike has been caused by the Fed hiking rates rapidly in an effort to combat inflation. Short-term rates are falling back slightly while long-term rates tick higher on economic growth forecasts. A meaningful steepening of the yield curve typically is associated with the bottoming of a bear market and the beginning of a new bull market for stocks. The market as a whole would like to see the yield curve un-invert but that may not happen until later in 2024 as the Fed gets to cutting rates.
How often does the FOMC meet to discuss rate cuts or hikes? (Scroll Down for Answer)
Have a Great Week!
2. Once every 6 weeks. The FOMC meets 8 times throughout the year but has the ability to hold other meetings as needed to set emergency short term rates or use other tools.