Wall Street exhibited positive momentum last week, overcoming a series of disappointing economic indicators. Despite softer jobs data, declining consumer sentiment, and rising inflation rates, speculation about a possible Federal Reserve interest rate reduction contributed to the market’s upbeat performance.
The large-cap S&P 500 surged by 1.6% over the week, while the Dow Jones increased by 0.9%, and the tech-heavy Nasdaq Composite experienced a notable surge of 2%. This resilience came amidst ongoing strength in corporate sectors, a robust IPO market, and continued enthusiasm for technology driven primarily by artificial intelligence developments. Fortunately, concerns surrounding elevated trade tensions have eased considerably.
A key contributor to market sentiment, the University of Michigan’s preliminary Survey of Consumers showcased a decline in overall consumer sentiment, which dropped to 55.4 in September. This represented a 4.8% decrease from the previous month and a striking 21% year-over-year decline, the lowest reading recorded since May. The Index of Consumer Expectations also tumbled significantly, falling 7.3% sequentially and 30.4% annually to 51.8. Although current economic conditions remained relatively stable, they saw a slight slip of 0.8% month-over-month and 3.3% year-over-year, indicating growing consumer apprehension regarding inflation and tariff uncertainties.
In terms of inflation, the U.S. annual rate escalated to 2.9% in August, the highest level observed since January. This increase followed two months of stagnation at 2.7%, meeting market expectations. Monthly Consumer Price Index (CPI) growth was reported at 0.4%, surpassed forecasts of 0.3%, largely driven by soaring gasoline prices and rising food costs. Core inflation remained steady at 3.1%, mirroring July’s figures, while the monthly core CPI rose by 0.3%, consistent with July’s growth rates.
Employment data revealed that the U.S. economy added a mere 22,000 jobs in August, falling short compared to an upwardly adjusted 79,000 jobs added in July and lower than the expected 75,000. Notably, job losses were pronounced in wholesale trade and manufacturing sectors, while growth persisted in health care and social assistance. The unemployment rate held steady at 4.3%.
Market predictions indicate a 93.4% likelihood of a 25-basis point rate cut in the upcoming September meeting, while the chances for a 50-basis point cut stood at 6.6%. These odds have shifted since September 5, as expectations for a substantial rate cut diminished due to higher inflation data.
Adding to the positive market landscape, six companies went public within the week, raising over $100 million each—an achievement not seen since November 2021. Noteworthy IPOs included Gemini Space Station, Black Rock Coffee Bar, Via Transportation, Legence, Figure Technology Solutions, and Klarna.
Amidst this backdrop, several exchange-traded funds (ETFs) focused on cryptocurrencies and blockchain technology demonstrated impressive gains. Bitcoin saw a rise of 4.5%, while Ethereum and Solana recorded respective growth of 3.7% and 13.3%. Highlighted ETFs included the CoinShares Bitcoin Mining ETF, which rose 26.7%, and the Global X Blockchain ETF, up 21.9%. The Schwab Crypto Thematic ETF and the Grayscale Bitcoin Miners ETF also posted significant increases of 21.8% and 21.4%, respectively, reflecting a strong market response to the digital asset sector.
As investors remain cautiously optimistic, the interplay between economic signals and market performance continues to evolve, setting the stage for potential developments in the financial landscape.
