What we learned last week:
“Creditors have better memories than debtors.” – Benjamin Franklin
Higher oil prices and rising treasury yields pull major stock market indexes down from all-time highs, finishing the trading week lower.
We begin last week’s recap with a concerning signal investors have been watching this summer, rising longer-term U.S. Treasury yields. Rising prices, particularly in oil, have raised the risk of inflation, amid this concern for inflation the U.S. debt hit $40 trillion last week. In a surprise move, the Treasury Department announced the agency will step up as a buyer of longer-term bonds with the objective of stabilizing rising yields and falling bond prices.
Sticking with interest rates, but moving departments to the Federal Reserve, meeting minutes from July’s Federal Open Market Committee meeting were released Wednesday. The minutes indicated more Federal Reserve officials are moving to the belief a rate hike will be needed if inflation doesn’t cool soon.
Higher interest rates would be a headwind for equity markets, restricting spending for both commercial and consumer.
Last week’s earnings were mixed for the largest retailers in the U.S. Walmart, considered a bellwether for the retail industry, disappointed investors with lower sales growth in U.S. stores causing shares of Walmart to drop more than 8% when the market opened Thursday.
Home Depot and Lowe’s quarterly earnings also painted a mixed picture of the US consumer. Consumers are still spending on their homes; however, the projects are smaller, maintenance focused, and spending on larger discretionary renovations remain muted.
Closing out our recap events in the middle east continue to be in the forefront for investors.
President Trump said the U.S. will launch the “most crushing economic operations ever taken against any country.” Referring to Iran in a Trush Social post last Wednesday, he went on to say any country whose financial institutions, businesses, airports, or government entities offer Iran a “lifeline” will face what he described as tremendous economic consequences of their own.
This initiative is an extension of the Trump administration’s Operation Economic Fury, launched in April of this year, aimed at cutting off Iran’s global terror financing and revenue streams.
The news caused Brent oil price to rise above $93 per barrel Thursday and the U.S. benchmark, WTI Crude exceeded $85 per barrel.
News out of Iran will continue to have investors’ attention as the week ahead closes out the month of August. Wall Street may have one of its biggest weeks of the summer, with Nvidia’s quarterly earnings report, Federal Reserve Chairman Kevin Warsh’s Jackson Hole speech Friday, and key inflation data.
The busy week of events will likely set the tone for stocks and bonds heading into the traditionally volatile month of September.
What’s ahead this week:
Economic Reports
- Price inflation will have the spotlight this week. The Federal Reserve’s preferred measure of inflation, PCE comes out Wednesday morning for the month of July
- The housing market remains under pressure due to higher borrowing rates, new home sales reports Tuesday
Earnings
- The company with the CEO referred to as the ‘Godfather of AI’, Nvidia, reports quarterly earnings Wednesday. This report is the most anticipated report for its quarterly growth and growth outlook. Nvidia reports after hours Wednesday, lining up Thursday to be heavily traded.
My goal is for you to feel educated and informed about variables we do and don’t have control over and find ourselves working within. I hope to do it in an informative and relatable way. As always, I value your relationship and planning objectives – my door is always open for conversation.
