Markets
Stocks fell last week, buffeted by concerns about stock price valuations and a possible government shutdown.
The Standard & Poor’s 500 Index declined 0.31 percent, while the Nasdaq Composite Index lost 0.65 percent. The Dow Jones Industrial Average slipped 0.15 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 0.34 percent.1,2
Stocks Under Pressure to end the month
The S&P 500 and the small-cap index Russell 2000 hit all-time intraday highs on Tuesday before trending lower. The decline turned into a three-day retreat for stocks.3
Adding to the selling pressure was Federal Reserve Chair Powell, who made cautious comments on stock price valuations on Tuesday. Investors were also watching a possible government shutdown as Congressional budget deliberations appeared to stall.4,5
It was the first time in six months that all three averages (Dow, S&P 500, and Nasdaq) declined over three consecutive sessions.6
Stocks rebounded Friday after the Personal Consumption & Expenditures (PCE) Index—the Fed’s preferred inflation measure—was in line with expectations. The news appeared to reassure investors that the Fed would move ahead with its “penciled-in” rate adjustments for the remainder of this year.
October can be rather ‘spooky’ for investors as we had a number of stock market crashes, from 1929, 1987, 2008. The best Dow Jones month for October was 2022 up 4000. October also has been known as a ‘bear killer’, meaning where the markets made a bottom in October.
Economic Snapshot
A flurry of updated economic data hit last week. Here are the key takeaways:
Overall, the indicators suggested a strong economy. The final estimate of Q2 gross domestic product was 3.8 percent, stronger than previous reports. Durable goods orders rebounded in August, driven by a surge in aircraft orders. And weekly jobless claims fell.8
The fact that the PCE was in line with estimates—core inflation of 2.9 percent year over year—was welcomed news for investors. The report seemed to support Fed Chair Powell’s position, who on Tuesday suggested that weakness in the labor market outweighed concerns about stubborn inflation.9
Ken likens the current market economy to the ‘Energizer Bunny,’ suggesting it still has momentum despite being due for a potential pullback. Mahoney believes a 3-5% correction would be healthy and welcomed, especially with the 3rd quarter earnings season around the corner, when investors should focus on “beat and raise” names like Microsoft (MSFT) and Nvidia (NVDA). Mahoney also sees potential in non-tech names like JPMorgan (JPM), citing its strong fundamentals and 2% dividend yield.
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