The markets rose again to record highs on Friday as investors were encouraged by the remarks of the Fed chairman in which he reported substantial further progress in the economy and the labor market. His plans are for a gradual tightening of Fed policy which should be good for stock markets. All indices rose and energy stocks did especially well. The SPX, DOW and Nasdaq all ended up for the week.
Federal Reserve Chairman Jerome Powell reaffirmed the central bank’s plans for monetary policy at the Jackson Hole Symposium. He said that it would start slowing the pace of its current $120 billion monthly asset purchases of Treasury and mortgage securities by the end of the year. The strong employment report in July provided evidence of progress in the economic recovery. The reduction in asset purchases will not have any effect on the decision on interest rates, currently near zero. Powell is still confident that the surge in inflation this year be temporary and will reverse on its own, without the need for an increase in interest rates that could do more harm than good.
The Bureau of Economic Analysis reported that personal income rose 1.1% in July as did disposable personal income, exceeding the estimate of 0.3%. Personal consumption expenditures increased by 0.3% in line with estimates. Spending, which account for about 2/3 of economic activity, had risen 1.1% in June. The PCE price index was up 0.4%. Excluding food and energy, the Core PCE price index rose 0.3%, the same as the estimate. This is the slowest increase in 5 months. The increase in Core PCE is 3.6% on an annual basis. The PCE price index was up 4.2% from one year ago. The Core PCE is the measure the Fed uses to asses how closely it is reaching its 2% inflation target. The Personal Saving Rate increased to 9.6%.
The trade deficit decreased by 6.2% as imports fell and exports increased.
The University of Michigan consumer sentiment index in August dropped by 13.4%, the biggest drop in more than 10 years. The value was 70.3, down from 81.2 in July and also lower than the 71.8 in April 2020 early in the pandemic. The expectations component dropped to 65.1 form 79.0 and current conditions fell to 78.5 from 84.5.
The SP 500 is down by 0.88% to close at 4509.37. The index is up 1.52% over five days, up 2.60% over one month, up 7.26% over three months and up 28.54% over one year.
The trailing P/E is 31.26 compared to 36.19 one year ago and estimated future P/E 22.26. Dividend yield is currently 1.31 compared with 1.75 one year ago.
Leading stocks were OXY up 6.92%, COG up 6.25%, APA up 5.94%, FCX up 5.88% and ZION up 5.02%.
Trailing stocks were MRNA down 4.52%, DLTR down 2.77%, AZO down 2.54%, AAP down 2.39% and ETR down 1.75%.
The Dow Jones industrial Average is down by 0.64% to close at 35455.80. The DOW is up 0.96% over five days, up 1.49% over one month, up 2.68% over three months and up 23.74% over one year.
The trailing P/E is 23.86 compared with 28.62 year ago and an estimated future P/E of 19.26. The current dividend yield is 1.78% compared with 2.23 one year ago.
Leading stocks were DOW up 2.72%, BA up 2.42%, DIS up 2.03%, AXP up 1.90% and GS down 1.77%.
Trailing stocks were WMT down 0.56%, CRM down 0.47%, MRK down 0.35%, CSCO down 0.30%, and JNJ down 0.21%.
The NASDAQ composite is up by 1.23% and closed at 15129.50. NASDAQ is up 2.82% over five days, up 3.11% over one month, up 10.04% over 3 months and up 29.36% over one year.
Leading stocks were BBIG up 80.89%, GAMB up 66.94%, NURO up 65.60%, ATER up 47.22% and SPRT up 33.65%.
Trailing stocks were EFTR down 21.37%, AADI down 21.21%, PDEX down 14.06%, APLT down 13.05%, and BLCT down 11.89%.
The MidCap SP400 is up by 1.85% to close at 2767.06. The SP400 is up 3.42% for the past 5 days, up 2.34% for the past month, up 1.45% for the past 3 months and up 42.16% over the past year.
Leading stocks were EQT up 7.32%, CRNC up 7.10% and PGNY up 6.56%.
Trailing stocks were OLLI down 6.69%, FIVE down 4.37% and URBN down 1.68%
The SmallCap SP600 is up by 2.93% to close at 1375.04. The SP600 is up 4.09% for the past 5 days, up 2.52% for the past month, up 0.23% for the past 3 months and up 50.77% over the past year.
Leading stocks were NBRWF up 14.02%, NBR up 13.43% and LPI up 12.88%.
Trailing stocks were HIBB down 9.23%, BIG down 4.85% and ENDP down 3.33%.
The CBOE VIX is down 13.00% and closed at 16.39. The VIX is down 11.69% over five days, down 10.14% over one month, down 2.21% over three months and down 28.61% over one year.
On the New York stock exchange 2731 stocks advanced and 568 declined, while on Nasdaq 3374 advanced and 992 declined.
There were 165 new 52 week highs and 32 new 52 week lows on NYSE with 208 new highs and 57 new lows on NASDAQ.
The 2 year Treasury note yield is 0.231% and 10 year is 1.314%. The 10 year yield is up 10.7% over five days, up 8.1% over one month, down 25.2% three months ago, and up 59.8% one year ago.
SP500 Sector Performance % change
Communication Services +1.60
Information Technology +0.97
Consumer Discretionary +0.90
Real Estate +0.87
Consumer Staples +0.35
Health Care -0.16
Energy has been up 7.34% over five days, down 1.01% over one month, down 5.29% over three months and up 35.50% over one year.
Health Care has been down 1.18% over five days, up 1.79% over one month, up 8.95% over three months and up 24.70% over one year.