Monday’s flat stock market performance reflected investors’ efforts to restore their composure in the face of rising rates and tighter US monetary policy.
By lunchtime, the leading indices had recovered sharply from their session lows.
After dropping by over 300 points early in the day, the session’s Dow Jones Industrial Average eventually turned positive.
Before it, they were 20 points behind. The Nasdaq Composite lost 0.4% and the S&P 500 lost 0.2%.
Because of the increase in interest rates, the technology sector of the S&P 500 did the poorest. While Walmart and Chevron gained ground, their combined 2% was offset by the 3% declines of Dow Inc and Salesforce (both parts of the Dow Industrials).
After Federal Reserve Chairman Jerome Powell’s brief and forthright statements in Jackson Hole, Wyoming, seemed to dash expectations that the central bank might reverse its aggressive path of rate rises in the months ahead, Wall Street saw a significant sell-off on Friday.
For the first time since May, the Dow dropped by 1,000 points.
This represents a loss of a little over 3%. Drops of 3.4% and 3.9% on the S&P and Nasdaq, respectively, were the worst for both indexes since June.
As a result of the decline, August’s gains in all three averages were lost.
Vital Knowledge’s Adam Crisafulli argued that while “the aggressive and unrelenting selling from Friday is abating,” there isn’t much genuine buy demand because even the bulls want to wait until after this week’s major macro events (such as China’s PMIs and the Eurozone CPI on Wednesday and the US jobs report on Friday).
“The late summer crowds/volume circumstances make the setting much more dangerous than typical, and September’s awful seasonals are just another reason putting folks on edge,” the author writes.
After Monday’s address by Fed Vice Chair Lael Brainard, the August nonfarm payrolls data won’t be released until Friday.
