US Stock Weekly Update 22 - 26 Aug 2022

​U.S. stocks fell overall last week. The S&P fell 4% for the week, the Nasdaq fell 4.4%, and the Dow fell 4.2%, with losses concentrated on Friday, Powell's hawkish speech at a global central bank meeting. The yield on the 10-year U.S. Treasury bond continued to rise by 8 basis points and closed at 3.05%. The VIX, the fear index, surged 24% this week. Oil futures rebounded, with WTI up 3.74% for the week to close at 92.97. Spot gold extended its decline and closed the week down 0.5% at $1,738 an ounce. The U.S. dollar index rose 0.68% for the week to a record high of 108.85.

The core PCE price index of the United States recorded 4.6% in July, lower than the expected 4.70% and the previous value of 4.80%. Institutional analysis said that U.S. consumer spending barely increased in July, but inflation slowed sharply, which may provide room for the Federal Reserve to slow down the pace of interest rate hikes. The average national gasoline price fell to around $4.27 a gallon in the last week of July, according to the AAA, after hitting an all-time high of just over $5 in mid-June, potentially freeing up money for other spending. Prices for clothing and services such as air travel and hotel and motel accommodation also fell in July, keeping inflation in check.

The U.S. University of Michigan consumer confidence index recorded 58.2 in August, better than the expected 55.2, and the previous value of 55.1. Federal Reserve Chairman Jerome Powell said in a speech at the annual meeting of global central banks that the labor market is particularly strong, but structural imbalances and high inflation continue to spread. The Fed's top priority is to reduce inflation to its 2% target, and it must stick to tightening until the job is done. With the Fed raising and keeping rates high, the employment environment is likely to soften a bit, causing some pain for households, which are the unfortunate costs of lower inflation, but the inability to restore price stability will mean more pain.

Analysts pointed to Powell's speech, as well as interviews with most other FOMC members, which focused on keeping the federal funds rate at the terminal rate for an extended period of time, while the market is still pricing in a rate cut soon after the rate peaks. A rate cut at the end of 2023 may be somewhat optimistic for now, and the market needs to reassess the view that rates will eventually be higher.

Economic Releases For The Week (29/8/2022-2/9/2022):

30/8/2022
JP - Japan's Unemployment Rate, 7.30AM
EU - Eurozone's Economic Sentiment, 5.00PM
EU - Eurozone's Industrial Sentiment, 5.00PM
EU - Eurozone's Services Sentiment, 5.00PM
EU - Eurozone's Consumer Confidence, 5.00PM

31/8/2022
JP - Japan's Retail Sales, 7.50AM
CN - China's NBS Manufacturing PMI, 9.30AM
CN - China's NBS Non Manufacturing PMI, 9.30AM
JP - Japan's Consumer Confidence, 1.00PM
EU - Eurozone's Inflation Rate (Flash), 5.00PM
US - United States' Chicago PMI, 9.45PM

1/9/2022
JP - Japan's Jibun Bank Manufacturing PMI, 8.30AM
CN - China's Caixin Manufacturing PMI, 9.45AM
EU - Eurozone's S&P Global Manufacturing PMI, 4.00PM
UK - United Kingdom's S&P Global Manufacturing PMI, 4.30PM
EU - Eurozone's Unemployment Rate, 5.00PM
US - United States' S&P Global Manufacturing PMI, 9.45PM
US - United States' ISM Manufacturing PMI, 10.00PM

2/9/2022
EU - Eurozone's Producer Price Index, 5.00PM
US - United States' Unemployment Rate, 8.30PM
US - United States' Factory Orders, 10.00PM

Sources from: Investing.com; Reuters.com, Bloomberg

Louis Yap

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