Markets
Stocks were mixed last week despite a powerful Friday rally sparked by Federal Reserve Chair Jerome Powell, who opened the door to adjusting short-term interest rates. The Standard & Poor’s 500 Index picked up 0.27 percent while the Nasdaq Composite Index lost 0.58 percent. The Dow Jones Industrial Average rose 1.53 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, increased 0.80 percent.1,2
All Eyes on Powell, and ears
Stocks traded in a narrow band to start the week as investors awaited fresh economic data and comments from Fed officials at their annual symposium in Jackson Hole, Wyoming. After a big retailer reported quarterly results on Tuesday and gave encouraging guidance, stocks pushed higher. But markets took a breather later in the day as pressure on megacap tech and chipmakers led the Nasdaq and the broader market lower.3
The S&P 500 and Nasdaq fell after minutes from the Federal Reserve’s July meeting were published; they revealed that most Federal Open Market Committee (FOMC) members were more concerned about inflation than the job market.4
On Friday, markets rebounded after Fed Chair Powell opened the door to a rate move at the Fed’s September meeting. The day’s gain was strong enough to regain the week’s lost ground for the S&P and nearly all of it for the Nasdaq—and put the Dow solidly ahead for the week.5
Watch the Rotation, what comes next
Investors appeared to rotate out of megacap tech as some expressed concern about valuations and the durability of the AI-driven rally. Two facts helped support this observation: the S&P fared better than the tech-heavy Nasdaq for the week, and the Russell 2000 Index of small-cap stocks (+3.25 percent) beat all three major stock averages.6
The Federal Reserve also rotated a bit. In contrast to the Fed’s July meeting—where inflation was the bigger concern for most Committee members—Fed Chair Powell’s Friday morning speech at Jackson Hole revealed the FOMC was now more concerned with the jobs market.7
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