September 2, 2023 Market Update

Historically, August has been a difficult month for stocks, and this past August was no exception.  Despite the recent string of positive sessions that helped trim recent declines, the S&P 500 fell by 1.77% in August, while the Nasdaq retreated by 2.17%, and the Dow declined 2.36% last month.

Reasons for the stock market’s struggles last month include profit taking, higher treasury yields, and China’s recent economic woes.   Meanwhile, the Labor Department’s job’s report for August, released on Friday, suggests the U.S. labor market just might be cooling as a result of the Fed’s efforts to rein in inflation.  While U.S. employers added approximately 187,000 persons to their payrolls, that was significantly less than the average pace over the prior year, and not enough to keep the unemployment rate from rising to 3.8%.

Although all the major indexes lost ground in August, last month’s weak results were not enough to wipe out gains from earlier in the year.  Not surprisingly, the Nasdaq leads the pack.  It is off to its best start to the year since 2003, while the Dow and S&P 500 recorded their best year-to-date results since 2021, according to Dow Jones Market Data.

American consumers seem to be losing some of their mojo.  If so, it could be a serious blow to corporate earnings, the stock market, and the economy.

The Conference Board’s Consumer Confidence Index declined in August to 106.1 from 114.0 in July, its biggest drop in two years.  The survey showed consumers were concerned with rising prices for food and gasoline.  Moreover, after months of positive feedback on the state of the labor market, fewer of those surveyed indicate jobs are “plentiful” and more feel jobs are “hard to get”.  In addition, survey participants planned to buy fewer cars and homes over the next 6 months.

In short, it seems as though Americans were less confident about the future in August than they were in July, and perhaps for good reason.  Data released by the Bureau of Labor Statistics showed that job openings in July declined to 8.83 million, the lowest mark since March 2021.

It’s important to keep in mind that there are still many more job openings than people looking for work, and wages have been growing faster than inflation as of late, which should give a boost to consumer spending.  In addition, last week’s data on job openings could encourage the Federal Reserve to hold off on further rate hikes, which would provide a boost to the economy and the stock market alike.

At this point, however, deciding if the glass is half-full or half-empty seems to be a matter of perspective.

That’s all for now.  Have a great holiday weekend, and invest wisely my friends.