Market Update
Stocks closed mostly higher in August, buoyed by a strong close to the month. Favorable inflation data and economic reports helped drive stocks higher toward the end of the month as investors took heed of Federal Reserve Chair Jerome Powell's statement that is approaching time to lower interest rates. The Global Dow led the benchmark indexes, with the S&P 500, the Dow, and the Nasdaq all ending the month higher. The Russell 2000 wasn't able to keep pace as it closed the month lower. Despite the strong finish, stocks rode a bumpy ride, falling lower mid-month as investors worried that the economy was slowing, and the Fed didn't react in time to stem the negative tide. However, as more favorable economic reports emerged and the Fed seemed ready to ease its restrictive monetary policy, investors were ready to jump back into the market. Among the market sectors, only consumer discretionary and energy declined, while real estate and consumer staples advanced the most.
Inflationary data showed price pressures continued to stabilize in July. Growth of the U.S. economy continued at a modest pace, despite the Fed's restrictive monetary policy. Moderate economic growth should be another plus as the Fed weighs its current monetary policy. Job growth continued to slow in July, falling short of expectations. New weekly unemployment claims decreased from a year ago, while total claims paid increased.
Nearing the end of Q2 corporate earnings season, S&P 500 companies are reporting mixed results. About 91% of the S&P 500 companies have reported results. Of those companies, 78% reported earnings per share (EPS) above estimates, which is in line with the five-year average of 77% and higher than the 10-year average of 6.8%. In general, the market has rewarded companies that reported positive earnings surprises with price increases, while companies that fell short of earnings expectations have generally seen their stock value dip.
Bond yields fell as bond prices increased in August. Ten-year Treasury yields generally closed the month lower. The two-year Treasury yield dropped 3.7 basis points to about 3.93% on the last trading day of August. The dollar weakened against a basket of world currencies, driven lower by the anticipated interest rate cuts later in the year.
International Markets
Global inflation continued to trend lower. Eurozone inflation hit a three-year low when the annual rate fell to 2.2% in August. The Euro fell to a two-week after trading at $1.108 at the end of August as falling consumer prices reinforced expectations for an August rate cut by the European Central Bank. Declining inflation also impacted bond yields. The 10-year German bond yield fell 2.25% as investors anticipated rate cuts. In China, manufacturing PMI retracted to 49,08 while the GDP slipped from 5.3% to 4.7%. For August, the STOXX Europe 600 Index rose 5.5%; the United Kingdom's FTSE gained 2.5%; Japan's Nikkei 225 Index rose 7.6%; and China's Shanghai Composite Index declined 2.2%.
On a Personal Note
Jeff and Peggy spent a weekend at Norris Lake with some friends. August was back to school month for Drew and his family. His girls were sad summer is over, but Drew was so happy that he celebrated with a Sammy Hagar concert! Chris's daughters started the new school year. He has one in high school and one in junior high now. Between schoolwork, cheering for freshman football, and club soccer, it promises to be a busy yet exciting fall. Lisa and David both celebrated their birthdays last month. It's funny how the years keep passing by, but they still remain 39 years old. Sam and his family spent a weekend camping at East Harbor State Park on Lake Erie. Growing up, many fond memories were made here and it was great to visit the park again. Peter and Taylor are expecting their first child and are very excited! Taylor is trying to keep her head straight between moving houses and preparing for a baby. The MDM team is looking forward to fall and cooler temperatures!
