This is The Takeaway from today’s Morning Brief, which you can Register to receive in your inbox every morning along with:
Stocks ended last week under pressure.
They started this week in this position.
When the closing bell rang on Wall Street on Monday, the Nasdaq (^IXIC) had shed 3.4%, deepening losses after falling into corrections last week.
The benchmark S&P 500 (^GSPC) had lost 3%, while the Dow (^DJI) was down 1,034 points.
The stars of the stock market this year – The Magnificent Seven – lost 652 billion dollars in market capitalization on Monday alone.
The overnight slaughter in Asian markets that sent US stocks down as much as 6% in the early hours of Monday has created new pressure on concerns about the yen’s position to “run the business.”
The price of cryptocurrencies captured the breadth of the risk movement in the markets, as bitcoin (BTC-USD) and ether (ETH-USD) fell to some of the biggest one-week losses since when FTX falls. And several US online retailers appeared to be struggling with connectivity issues early next Monday as investors rushed to check their portfolios – or perhaps enter or exit positions during of the first riot.
All kinds of market commentators were on board on Monday. Others warned of panic over a return to the prices seen a few months ago. Others were kicking the ball on the AI business that seemed to be finally collapsing under the pressure.
Wall Street strategists have offered all sorts of explanations, from the aforementioned trade-off in the yen, to Vice President Kamala Harris’s numbers against Donald Trump, to growing investor complacency nothing in AI business and low uncertainty. And this week’s news that Warren Buffett has liquidated his holdings in Apple provided an explanation.
But last week’s market move had a clear influence: the Federal Reserve.
And this is still a neat way to understand why the cruise market’s year ended abruptly. When the Fed held interest rates last week, investor sentiment indicated that the central bank had made a policy mistake by not taking the opportunity to lower rates. first the economy showed signs of weakness.
July’s soft jobs report added to concerns that instead of lowering rates from a strong position (to reduce inflation without damaging the labor market), the Fed would end up cut from the level of demand and the labor market shrinks quickly.
At a press conference last week, Fed Chairman Jay Powell reiterated that recent declines in hiring and rising unemployment are “normal” for the labor market. Investors seem less convinced.
So, with more than six weeks between now and the Fed’s next regularly scheduled policy meeting, markets are rushing to put pressure on the central bank not to miss its next meeting.
The language quickly moved from whether The Fed should cut rates in Sept. 18 to how much The Fed should cut. (50 points is the current market expectation.)
Some even suggested on Monday that the Fed could consider cutting interest rates between its scheduled meetings, the last step taken during the pandemic in March 2020.
A 15% drop in the Nasdaq would appear to bring little momentum. But one cannot be too sure.
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