The S&P 500 (SP500) experienced a 2.50% increase during the week, closing at 4,515.77 points. This marked gains in four out of five trading sessions. The accompanying SPDR S&P 500 Trust ETF (NYSEARCA:SPY) also advanced by 2.55% for the week.
The recent performance of the benchmark index reflects the best weekly gain since mid-June. This surge has been attributed to the release of economic data hinting at a slowdown in the economy, raising speculation that the Federal Reserve may delay further rate hikes.
Additionally, the rise in technology stocks contributed to the S&P 500’s weekly advance. Furthermore, there has been increased attention on cryptocurrencies following a U.S. federal court decision that may pave the way for the first-ever Bitcoin exchange-traded fund (ETF).
In August, the S&P 500 closed with a loss of approximately 1.8%, marking its second negative month this year. Concerns surrounding higher interest rates, a bond sell-off, a technology pullback, and unexpected moves from credit rating agencies weighed on market sentiment during the month.
This week was filled with significant economic data related to the labor market and inflation. This data is expected to influence the monetary policy decisions of the Federal Reserve at its upcoming meeting. Many of the indicators suggest a cooling economy, raising hopes that the central bank will keep rates unchanged.
Noteworthy data releases included the Job Openings and Labor Turnover Survey (JOLTS) for July, which revealed a decline in job openings below 9 million for the first time since March 2021. Furthermore, ADP’s jobs report showed a lower-than-expected rate of private sector employment growth. The latest Challenger report indicated a significant increase in job cuts for August. Finally, the nonfarm payrolls report released on Friday showed a slight increase in the unemployment rate.
Market participants found solace in these reports, as they suggest that the previously resilient labor market is now showing signs of weakness, possibly due to the Federal Reserve’s aggressive tightening campaign. Investors hope that these reports will convince the central bank to cease rate hikes. The only negative aspect was the consecutive decline in jobless claims numbers for the third week in a row.
“The loosening up of labor market slack in today’s (nonfarm payrolls) report, combined with the friendly JOLTS report from earlier this week, should cement the case for a Fed on hold later this month. The more interesting question will be whether the median dot continues to project one more hike this year. Either way, Fed leadership must be happy with a week that marked up odds for achieving a soft landing,” said Michael Feroli, an analyst at JPMorgan.
In addition to weak labor market data, other economic indicators also painted a gloomy picture. The Conference Board’s consumer confidence gauge fell in August, following two consecutive months of increase in June and July. The second estimate of U.S. GDP growth for Q2 was revised downward by a greater-than-anticipated margin. Furthermore, the core personal consumption expenditures price index, which serves as the Fed’s preferred inflation gauge, remained steady in July on a month-over-month basis.
Regarding sector performance for the week, nine out of eleven sectors ended in the green. Technology led the pack with an outsized gain of nearly 4.5%, followed by Energy and Materials. Utilities and Consumer Staples were the only sectors to experience losses.
Summary of Sector Performances:
- Information Technology: +4.42%
- Energy: +3.78%
- Materials: +3.57%
- Communication Services: +3.46%
- Consumer Discretionary: +3.03%
- Industrials: +2.02%
- Financials: +2.00%
- Real Estate: +1.44%
- Health Care: +0.05%
- Consumer Staples: -0.33%
- Utilities: -1.73%
For a visual representation of the year-to-date (YTD) sector performances and their comparison to the S&P 500, refer to the chart below: