THE WEEK ON WALL STREET

A hotter-than-expected inflation report sent stocks sharply lower last week as investors faced the prospect of more aggressive interest rate hikes by the Federal Reserve for perhaps a longer period.

The Dow Jones Industrial Average fell 4.13%, while the Standard & Poor’s 500 lost 4.77%. The Nasdaq Composite index dropped 5.48% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dipped 1.78%.^1,2,3

INFLATION DEFLATES MARKETS

Stocks suffered their worst day in more than two years last Tuesday as markets were caught off-guard by a higher-than-anticipated August inflation report.

Markets expected the August report to show a substantial cooling of inflation, potentially allowing the Fed to ease up on interest rate hikes. Instead, the elevated inflation number not only undercut those easing hopes but raised the possibility of a more significant rate hike. On Tuesday, traders assigned a 28% probability of a 100 basis point hike, from a 0% chance just the day before. Price action remained choppy for the remainder of the week, closing the week with additional losses as a global package-delivery company warned of a worldwide recession.⁴

AUGUST CPI DISAPPOINTS

August’s Consumer Price Index (CPI) rose 8.3% from a year ago, showing a continued deceleration in price increases (July’s CPI was 8.5%, and June’s was 9.1%). Despite moderating price increases, traders were disappointed, given the general expectation of a more substantial slowdown in inflation.⁵

Core inflation (excluding food and energy) was particularly alarming to investors, which jumped 6.3% year-over-year. That number was well above the 5.9% rate from June and July. From the market’s perspective, sufficient inflationary pressures exist for the Fed to maintain its hawkish interest rate policy for possibly longer than investors had hoped.⁶

Consumer Price Index (CPI)-

The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of US inflation. The US Department of Labor publishes the CPI every month.

Source

Hello Faye,

Believe me, everyone on Wall Street wants inflation to go away, or at least shrink back to below 2%, a level we enjoyed not so long ago.

But Tuesday's Consumer Price Index report showed it might be some time before we see 2% again. Consumer prices ticked slightly lower in August, but not as much as what Wall Street wanted. Economists, pointing out that gasoline prices dropped in the past month, made bold predictions for August inflation. Too bold, as it turned out.

Stocks got clobbered, and bonds didn’t fare much better. The inflation report showed that higher food, shelter, and medical services costs were to blame. Higher costs in those areas indicate inflation could be more persistent and entrenched than we thought.¹

So now the question is, “What will the Fed do at its upcoming meeting?” Keep in mind that in early September, the CME Group’s indicator said smaller increases were possible. But no more.

All too often this year, I haven’t had great news to pass along about the markets. But I want to assure you that I’m committed to staying on top of the news in good times, bad times, and in-between times.

If Tuesday's drop raised some new concerns, please give me a call. I can be reached at 800-871-1219 or [email protected]. Hit the Meet with Faye button if you want to schedule an appointment. Thanks for your trust.  

Letter citation below

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Housing Starts.

Wednesday: Federal Open Market Committee (FOMC) Meeting Announcement. Existing Home Sales.

Thursday: Index of Leading Economic Indicators. Jobless Claims.

Friday: Purchasing Managers’ Index (PMI) Composite.

Source: Econoday, September 16, 2022

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: AutoZone, Inc. (AZO).

Wednesday: General Mills, Inc. (GIS).

Thursday: Costco Wholesale Corporation (COST), FedEx Corporation (FDX), Lennar Corporation (LEN).

Source: Zacks, September 16, 2022

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

The fine print on a lease or a mortgage is always worth reading. Ask the business owners and homeowners who have learned this from experience.

“There is nothing in a caterpillar that tells you it's going to be a butterfly.”

~

BUCKMINSTER FULLER

Presented by Faye Sykes, September 19, 2022

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Copyright 2022 FMG Suite.

CITATIONS:

1. The Wall Street Journal, September 16, 2022

2. The Wall Street Journal, September 16, 2022

3. The Wall Street Journal, September 16, 2022

4. The Wall Street Journal, September 13, 2022

5. The Wall Street Journal, September 13, 2022

6. The Wall Street Journal, September 13, 2022

Letter Citation

This material was prepared by MarketingPro, Inc. for use by Scarlet Oak Financial Services.

The S&P 500 Composite Index is an unmanaged index that is considered representative of the overall U.S. stock market. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.

Citations.

1. BLS.gov, September 13, 2022