The major stock market averages posted a solid rally last Friday – the Dow Jones Industrial Average rose 1.7% (or 675 points), the Standard & Poor’s 500 Index advanced 2.1%, and the NASDAQ Composite jumped 2.6% (its best day of the year, according to Reuters). Factors behind the Friday rally included some bargain hunting, a buy-the-dip mentality after the S&P 500 hit correction territory earlier in the week, and some relief the U.S. government would avoid a shutdown. Additionally, no new tariff headlines rattled the nerves of investors. Still, despite the daily rally, the major indices posted another notably negative week.
On the week, the Dow fell 3.1% to 41,488 – the S&P fell 2.3% to 5,639 – the NASDAQ fell 2.4% to 17,754. The S&P and NASDAQ have now both dropped for the fourth consecutive week. Negative sentiment surrounding tariffs and weakening consumer confidence numbers prevailed and pushed the stock market lower. The pessimistic mood and selling pressure came despite some better-than-expected data on the inflation front that was released last Wednesday and Thursday.
Looking to the week ahead, investors will be watching the upcoming Federal Reserve policy meeting. According to CME FedWatch, the probability is 99% the Fed will leave interest rates unchanged when they announce their policy decision on Wednesday afternoon. While the market is essentially certain there will be no change in rates, it will be closely watching for any new commentary or clues regarding the Fed’s view on the health of the economy and the outlook for upcoming interest rate policy.
Also in the week ahead, a few notable earnings reports will come in, including numbers from Nike, Micron Technology, and FedEx. FedEx is considered a bellwether on the economy, so its report will be closely scrutinized for a read on the strength of the economy. Overall, financial markets will be primarily focused on continuing developments regarding tariffs and their potential impact/ramifications.
On a market history note, and for all the “gold bugs” out there, the price of gold rose above $3,000 per ounce for the first time ever last week! Gold is historically known as an inflation hedge and a place money often flows to when there is uncertainty in other areas of the financial markets and economy. It is also a way to diversify an investment portfolio, and many see it as a hedge against geopolitical risk/tumult.
As always, don’t hesitate to contact us with any questions or if you would like to schedule a meeting.
All the best – Southport Station Financial Management