It was a consequential week for market participants as the Federal Reserve made an interest rate decision on Wednesday. In addition, nonfarm payroll data was released on Wednesday and Friday. On Friday, markets had their worse day of losses since last year, pulling the market lower for the week.
The first of two main events for the week saw the Fed hold its key interest rate steady at a range of 5.25 percent to 5.5 percent. This was widely anticipated regardless of what the economy had done over the past couple of weeks. However, Fed Chair Jerome Powell said that he senses that the time to reduce interest rates is coming soon and there are downside risks to waiting any longer.
He also mentioned that the risk of a hard landing is low. A hard landing refers to a recession occurring because of interest rate hikes. Of course, the other main event this week was the release of the ADP nonfarm payroll report on Wednesday and the Bureau of Labor Statistics (BLS) version of that same report on Friday. Those reports indicate that the economy is starting to slow.
On Wednesday, the ADP report found that the economy added 122,000 jobs in July, which was lower than the expected 147,000 new positions. The BLS reported that there were only 114,000 jobs added in July compared to an expected 176,000 new positions. In addition, last month’s figure was revised downward to 179,000.
It was also revealed on Friday that the unemployment rate jumped from 4.1 percent to 4.3 percent, which was .2 percent higher than analysts expected it to be. Finally, it was reported on Friday that average monthly earnings increased by .2 percent as opposed to an expected .3 percent.
Despite the lack of hiring, the number of open positions beat expectations. On Tuesday, the JOLTS report found that there were 8.18 million available jobs, which was higher than the expected 8.02 million. Meanwhile the CB Consumer Confidence report found that the index jumped to 100.3 this month from 97.8 last month. The index was expected to come in at 99.7.
On Wednesday, it was reported that pending home sales jumped by 4.8 percent in the last month. Furthermore, the June figure was revised upward to show a drop of only 1.9 percent from May.
On Thursday, it was revealed that unemployment claims increased to 249,000 from last week’s figure of 235,000. Analysts had projected that there would be 236,000 claims this week. Also on Thursday, the ISM Manufacturing PMI came out at 46.8 percent, which was below the expected 48.8.
The S&P 500 closed down 131 points this week to finish at 5,346, which represented a loss of 2.39 percent over the past five trading days. The market made its high of the week on Thursday when it reached 5,555 and would reach its low of the week on Friday morning when it dipped to 5,306.
The Dow lost 801 points this week to close at 39,737. This represented a loss of 1.98 percent for the week, and most of the loss was attributed to a Friday session in which the Dow lost 610 points. The high of the week came on Wednesday at 41,169 while the low of the week came on Friday when the market hit 39,375.
Finally, the Nasdaq dropped 4.18 percent this week to close at 16,776. On Wednesday afternoon, the Nasdaq hit its high of the week at 17,770 and would make its low of the week on Friday morning when it dipped to 16,620.
In international news, Great Britain reduced its interest rate to 5 percent from 5.25 percent on Thursday. This comes on the heels of the Bank of Japan (BOJ) increasing the nation’s key interest rate from about .10 percent to about .25 percent. Australia announced on Monday that its yearly CPI was 3.8 percent while the Eurozone announced on Wednesday morning that its estimated inflation rate for the year was 2.6 percent.
Next week will be relatively light on news in the United States with only the ISM Services PMI on Monday and unemployment claims on Thursday scheduled to be released.