The S&P 500 index fell -2.9% last week and is now -6.25% from its July highs. The various index declines, in the wake of higher interest rates, tapered as expected with the value tilted DJIA -1.9%, the broad S&P 500 -2.9% and technology and growth heavy NASDAQ Composite -3.6%. This was the third consecutive week down in the markets. The S&P 500 ended Friday’s session at 4,320, down from last week’s closing level of 4,450. September is now down -4.2% month to date. Even so, the S&P 500 is still positive for 2023 with a year-to-date gain of more than +12%. Unfortunately, the equal weighted index is flat year to date.
With sentiment now negative, volatility up, and the markets down, opposite mid-July’s set-up, we are approaching what is normally a seasonal trading low for a few weeks. That said, broader seasonal weakness usually continues into mid-October, post 3rd quarter EPS reports.
The Federal Reserve did not change interest rates at the conclusion of its two-day meeting last week. The committee still lifted its median rate outlook for 2024 and 2025, indicating it expects to keep rates higher for longer than previously anticipated. The FOMC’s 2024 median rate outlook is now at 5.1%, up from its outlook of 4.6% in June. Its outlook for 2025 rose to 3.9% from 3.4%. This comes as the committee noted inflation remains elevated. We remind followers, the Fed and its “Dot Plot” are not historically predictive of future interest rates and stock markets as the data shows that they are more of a “momentum” player doing more of the same until something breaks.
All S&P 500 sectors fell last week, led by a -6.3% decline in consumer discretionary, a -5.4% drop in real estate and a -3.7% decline in materials. Health care stocks had the smallest declines, down -1.2%.
The consumer discretionary sector’s declines included shares of casino operators Caesars Entertainment (CZR) and MGM Resorts International (MGM) as they struggle with recent cybersecurity issues. Shares of Caesars fell -13% on the week while MGM dropped -11%. REITs were among the hardest-hit stocks in the markets amid investors’ interest rate worries.
The auto workers strike might dominate headlines this week with about 10% of the 150k person union on strike. Earnings releases will be minimal as we are at the end of the 3rd quarter and in the blackout window for news and stock buybacks.
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