The Asset Guidance Group Weekly Update For the week ending August 26 , 2022

3 Things… 

  1. Equity Trends: S&P500 struggling to hold support near bottom of trading range-trend UP but now 4.25% below 200-day MA; NASDAQ is now about 7.5% below its 200-day MA and testing support at bottom range, downtrend fading but unchanged; Dow at support 10.7% above its 200-day MA; 76% of the S&P 500 and 57% of the NASDAQ, respectively, are above their 50-Days; Bulls28:Bears42; VIX 28.59; [1]
  2. Bonds: Treasury yields were higher Friday after  Federal Reserve Chair Jerome Powell delivered a speech on the central bank’s tightening path.

    The 10-year Treasury yield traded at 3.058%, up 3 basis points. The 2-year rate, which is more sensitive to monetary policy changes, rose 5 basis points to 3.42%

     The weekly 2-year Treasury note/10-year Treasury note Spread rose to 1.11. Yields move inversely to prices and 1 basis point is equal to 0.01%. [2]
  3. Sectors: Best 3-month sectors: Consumer Discretionary (+9.33%);  Industrials (+4.38); Tech (+4.37); Crypto/Bitcoin $20,843.98; [3]

This Week’s Quotable

“Eight minutes. The market has been sitting there doing nothing all week, just for eight minutes…. I think people are just reassessing. It was fine. It was hawkish enough, but it wasn’t over the top. There was expectation for a very hawkish speech so it’s hard to measure up to that.” Wells Fargo Securities’ head of macro strategy Michael Schumacher  said of Powell’s Jackson Hole speech Friday August 26, 2022. [5]

Recent Highlights

  • PCE Inflation increased 0.2% (08/26)
  • Personal Income increased 0.2% (08/26)
  • Personal Spending increased 0.1% (08/26)
  • Personal Savings Rate at 5% (08/26)

In the Markets

Wall Street closed sharply higher on Thursday, led by a rally in tech stocks. Yield on the benchmark 10-year U.S. Treasury Note declined, rendering a rally in large-cap growth stocks. Investors eagerly await Fed chair Jerome Powell’s speech slated for Friday to get a hang of what is in store. All the three major stock indexes ended in the green.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) gained 1% or 322.55 points, to close at 33,291.78. Twenty-seven components of the 30-stock index ended in the positive territory, two ended in the negative, while one remained unchanged.

The tech-heavy Nasdaq Composite went up by 207.74 points or 1.7% to 12,639.27.

The S&P 500 rose 1.4%, or 58.35 points, to end at 4,199.12. All the 11 broad sectors of the benchmark index closed in the green. The Materials Select Sector SPDR (XLB), the Communication Services Select Sector SPDR (XLC) and the Technology Select Sector SPDR (XLK) rose 2.3%, 2% and 1.7%, respectively.

The fear-gauge CBOE Volatility Index (VIX) decreased 4.6% to 21.78. A total of 9.3 billion shares were traded on Thursday, lower than the last 20-session average of 10.8 billion. Advancers outnumbered decliners on the NYSE by a 3.84-to-1 ratio. On the Nasdaq, a 2.08-to-1 ratio favored the advancing issues.

2-Year:10-Year Yield Spread Widened

After narrowing to slightly more than 20bps earlier in the week, the spread increased back to its previously established 30-40bps following the Powell Speech from Jackson Hole, WY.

Economic Data

The Labor Department said on Thursday that initial jobless claims fell to 243,000, decreasing 2,000 for the week ending Aug 20. The previous week’s level was revised down by 5,000 from 250,000 to 245,000. The four-week moving average increased to 247,000, a rise of 1,500 from the previous week’s revised average of 245,500.

Continuing claims came in at 1,415,000 for the week ending Aug 13, decreasing 19,000 from the previous week’s revised level. The previous week’s numbers were revised down by 3,000 from 1,437,000 to 1,434,000. The 4-week moving average came in at 1,424,750, an increase of 12,500 from the previous week’s revised average. The previous week’s average was revised down by 750 from 1,413,000 to 1,412,250. [6]

Sources: [1][3][4] Stockcharts.com; [2] CNBC.com; [5] Dow drops 400 points after Powell reiterates Fed will continue to raise rates to fight inflation (cnbc.com); [6] Zacks Professional Services, “Today’s Key Market and Economic News” for Friday August 26, 2022; 

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