Blog Post

Stocks Down Following FED Speech

Most stock indices ended the volatile week substantially lower after a sharp drop on Friday.  Markets had been rallying on slower inflation and new home sales in hopes the FED may pivot from its inflation fight.  These hopes were dashed by Federal Reserve Jerome Powell’s speech at the annual Jackson Hole symposium on Friday.  In the speech Powell warned that it would be a mistake for the FED to pause or pivot prematurely and that “We will keep at it until we are confident the job is done,”.  However, he also said the FED will watch incoming data before the FED’s late September meeting and making a rate decision.  FED officials have publicly advocated for either 0.75% or 0.5% increase at that meeting.  Market participants may also have been concerned that the $10,000 student debt relief could actually add to inflation, forcing stronger action by the FED.  The only major index posting a slight gain for the week were emerging markets.

Treasury bond yields were mixed, inverting further with the 30-year bond at 3.197% and the 10-Year note at 3.043%.  30 year mortgage rates rose to 5.9%.  Crude oil rose to $92.97 a barrel and natural gas rose to $9.305 per MMBTUs.  The U.S. dollar index rose to 108.84.  Gold fell to $1750.80 an ounce.

In the economic numbers:

  • The Commerce Department reported:
    • New home sales fell 12.6% in July, to the lowest level since 2016 on higher prices, recession fears and higher mortgage rates.
    • The median price for a new home has risen 8.2% from a year ago to $439,400, although the pace of price increases is slowing.
    • Durable goods orders were unchanged in July from June.
      • Durable goods orders are not adjusted for inflation, so no change would be negative on an inflation adjusted basis.
      • Excluding defense, new orders were up 1.2%.
      • Excluding both defense and aircraft, which can be quite volatile, durable goods orders rose 0.4% in July.
      • Unfilled orders for durable goods were 17.8% above February of 2020.
    • The second quarter gross domestic product was revised from an initially reported 0.9% contraction to 0.6% on upwardly revised consumer spending.
    • Consumer spending rose 0.1% in July, following a 1.0% increase in June.  Consumer spending, unlike retail sales are adjusted for inflation and show real increases.
    • The personal consumption expenditures price index fell 0.1% in July.
      • Excluding volatile energy and food, the PCE index rose 0.1% in June.
      • From a year earlier the PCE price index, the FED’s preferred gauge of inflation rose 6.3%, down from the 6.8% year over year rise in June.
      • Personal incomes rose 0.2% in July.
      • Personal savings was unchanged at 5.0%.
  • The Labor Department reported:
    • Seasonally adjusted first time claims for unemployment fell to 243,000, down from a revised 245,000 in the prior week. 
      • The 4-week moving average of claims, designed to smooth out volatility, rose to 247,000 from a revised 246,500.
      • For the full unemployment report go here: .
  • The EIA weekly oil report is here: .  Also, the EIA reported in the prior week:
    • Field production of crude oil fell from 12.1MM BPD 12.0MM BPD.
    • Natural gas storage rose 60BN cubic feet and is below the 5-year average at this time of year.
  • Baker Hughes reported the number of active oil rigs rose 4 to 605.  The number of active natural gas rigs fell 1 to 158.

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Thank you,

Loren C. Rex, CFP®, MA                                                                     Erik A Smith, AIF®

Founder / Emeritus                                                                            President & C.E.O.                                                                                                                                             269-441-4143

Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.


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