The weather here in Las Vegas has apparently gotten the memo with the first day of fall happening this Friday! Thank you to all that participated and tuned in for our efforts to fundraise for St. Jude's Research Hospital this month!
Keep an eye out next week for an invite to our upcoming family-friendly event at Las Vegas Ballpark, the "Diazo Movie Night at the Ballpark!" We will be showing "Nightmare Before Christmas" as it is the 30 year anniversary. We look forward to seeing you there!
Please also look out for a call or email from somone on the team for your upcoming review and financial planning deep dive.
And now onto the weekly recap:
The major indices registered sizable declines this week. Softness in mega caps had a disproportionate influence on index performance, but there was no effort to rotate anywhere else so many stocks came along for the downside ride.
All 11 S&P 500 sectors finished in the red this week. The consumer discretionary (-6.4%), real estate (-5.4%), and materials (-3.7%) were the top laggards while the health care sector (-1.2%) saw the slimmest loss.
The catalyst for the weakness was another big jump in Treasury yields. The 2-yr note yield climbed eight basis points this week to 5.12%. The 10-yr note yield climbed 12 basis points this week to 4.44%. Including this week's move, the 10-yr note yield is up 35 basis points this month.
Those moves were largely in response to the Fed's hawkish pause on Wednesday.
As expected, the FOMC voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50%. There were few changes to the directive itself, but the market was focused on the Summary of Economic Projections and dot plot, which conveyed two key takeaways: (1) Policy rates are anticipated to remain higher for longer and (2) Fed officials are not expecting to cut rates in 2024 as much as they were anticipating when they updated their forecasts in June.
The median fed funds rate estimate for 2023 was unchanged at 5.6%, but the median estimate for 2024 was 5.1%, versus 4.6% in June. The former estimate suggests officials are still leaning in favor of one more rate hike this year, whereas the latter revision connotes an expectation that rates will come down by only 50 basis points in 2024, as opposed to 100 basis points when estimates were provided in June. Meanwhile, the median estimate for 2025 was 3.9% versus 3.4% in June, and a median estimate of 2.9% was introduced for 2026. The longer-run fed funds rate estimate was maintained at 2.5%, leaving one to infer that the Fed is going to stay committed to its 2.0% inflation target.
Fed Chair Powell said several times at his press conference that the Fed is going to "proceed carefully" when thinking about making a policy move, but said it's plausible that the neutral rate is higher than the longer run rate (2.5%), which he said is part of the explanation for why the economy has been more resilient than expected.
The wrinkle for the market wasn't that the Fed is decidedly hawkish at this point, it was that the Fed is still not dovish.
More Fed officials echoed Mr. Powell's view later in the week, Specifically, San Francisco Fed President Daly (a 2024 FOMC voter), Fed Governor Bowman (FOMC voter), and Boston Fed President Collins (not an FOMC voter this year or 2024) all made similar comments on Friday.
Other central banks also made policy announcements this week. The Bank of England voted 5-4 to leave its bank rate unchanged at 5.25%; the Hong Kong Monetary Authority left its key rate unchanged at 5.75%; the Swiss National Bank left its key rate unchanged at 1.75%; the Bank of Japan made no changes to its policy stance; the Riksbank increased its key rate by 25 basis points to 4.00%; and the Norges Bank increased its key rate by 25 basis points to 4.25%.
In corporate news, there were two notable initial public offerings this week. Instacart (CART) and Klaviyo (KVYO) both traded above their IPO price after opening, but rolled over with the rest of the market by the end of the week.
The UAW extended its strike to all GM and STLA parts and distribution centers beginning at noon ET on Friday. This followed confirmation that the UAW made progress on labor talks with Ford (F), but indicated that Stellantis (STLA) and General Motors (GM) are going to need "serious pushing."
| INDEX | STARTED WEEK | ENDED WEEK | CHANGE | % CHANGE | YTD % |
|---|---|---|---|---|---|
| DJIA | 34618.20 | 33963.80 | -654.40 | -1.9 | 2.5 |
| Nasdaq | 13708.30 | 13211.80 | -496.50 | -3.6 | 26.2 |
| S&P 500 | 4450.32 | 4320.06 | -130.26 | -2.9 | 12.5 |
| Russell 2000 | 1847.03 | 1776.50 | -70.53 | -3.8 | 0.9 |
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The data provided is for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. The information contained here is not guaranteed as to accuracy or completeness. All economic and performance information is historical and does not guarantee future results.
The Dow Jones Industrial Average is a price-weighted index comprising 30 widely traded blue chip U.S. common stocks. The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the NASDAQ stock exchange. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Cboe Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. Weekly and year-to-date figures for the VIX show percentage changes, not investment returns. The Russell 2000 Index tracks the performance of approximately 2,000 publicly traded small-cap companies in the United States. It is not possible to invest directly in an index.
The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the U.S. Federal Reserve. The spread measures the difference in yield between two government securities. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve. Year-to-date changes in U.S. Treasury bond yields are shown in basis points (bps). One hundred basis points equals one percent.
Oil prices are represented by West Texas Intermediate (WTI) crude oil.
The G20 countries comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, and over 75% of global trade.