Wall Street Faces Weekly Decline Despite Friday’s Modest Rise Amidst Overheating Economy Concerns

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Emerging from a fairly uneventful Friday, Wall Street has nonetheless concluded the week with a decline, marking it as the first faltering week after a three-week rally.

The S&P 500 showed a modest increment as it rose by 6.35 points or 0.1%, reaching 4,457.49 post a three-day stretch of continuous descent. Despite a rise on Friday, the index noted an overall fall of 1.3% for the week, impacted by Labor Day holiday which shortened the trading week.

The Dow Jones Industrial Average documented an increase of 75.86 or 0.2%, bringing it to a close at 34,576.59. Meanwhile, the Nasdaq composite had a slight push upward by 12.69 or 0.1%, to reach a wrap at 13,761.53.

All those indexes, however, expressed a decline over the past week, stirred by concerns that overheating economy may impel the Federal Reserve to persist high interest rates. Traders tuned-down the anticipation for 2022’s interest rate cuts from the Fed, influenced by data representing the robustness of the U.S. economy in the face of lofty rates and worldwide economic struggles.

Such economic insights have driven the yields in the bond market upward, consequently depressing stock prices. However, a relatively stable yield on Friday played a part in maintaining a calm atmosphere on Wall Street.

Smith & Wesson Brands documented a notable surge of 10.8% as the firearms manufacturer reported stronger-than-anticipated results for the three months through July. Despite the summer typically being a sluggish season for the company, its sales displayed a 35% boost from the previous year.

Kroger, the supermarket chain, ascended 3.1% occasioned by its earnings report. Though the company’s revenue didn’t meet expectations, its quarterly results superseded analysts’ predictions. Kroger and Albertsons have further announced an agreement to sell some stores, private-label brands, and other assets in a bid to seek regulatory approval for their proposed merger.

Looking ahead to the upcoming week, a significant amount of attention will likely be drawn to the latest U.S. inflation update due on Wednesday. After hitting a peak above 9% last summer, inflation has been somewhat easing, but the remaining progress to reach the Fed’s 2% target has the potential to stir concerns.

The spectre of high rates intended to slow the economy and dent the job market could lead to an underpinning inflation. The threat lies in this pushing the Federal Reserve to potentially raise interest rates once again or, at the very least, keep them high longer than investors anticipate.

In discussions with their clients, strategists at Bank of America have noted an acceptance that rates may remain high for longer, even if some dispute over whether the Fed has concluded hiking rates persists.

Attention will also be cast across the globe next week, as the European Central Bank takes a call on rates and additional data regarding China’s economy is released. Disappointing results of China’s recovery from COVID-induced restrictions could also weigh in on global economic growth prospects.

In overseas stock markets, Japan’s Nikkei 225 registered a drop of 1.2% in response to a report indicating the world’s third-largest economy grew just at a 4.8% annual pace during the April-June quarter, a decrease from the prior estimate of 6% growth. This impacted indexes across much of Asia, marking them modestly lower, though European markets saw a rise.

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