Weekly Update—Stocks Sharply Lower in Another Volatile Week

US: S&P 500 Index -4.0%, Dow -3.0%, Nasdaq -3.8%
Europe: STOXX Europe 600 -2.5%, German DAX -3.1% France CAC 40 -2.3%, U.K. FTSE 100 -0.7%
Asia: Japan Nikkei -6.0%, China Shanghai Composite +1.9%, Korea KOSPI  -6.0%
Rates/Commodities: 10-Year Treasury yield -9 basis points to 3.08%, WTI crude oil -2.6%, COMEX gold +0.4%

Major U.S. indexes, with the exception of the Nasdaq, turned negative on the year and entered correction territory this week—falling more than 10% from their most recent highs.

The S&P 500 Index snapped a six-day losing streak on Thursday after a string of better-than-expected earnings helped lure buyers, but the path of least resistance remained lower as the benchmark index slipped again on the Friday to close out the week down nearly 4%. Defensive sectors held up best, though all were lower, gold prices rose, and the yield on the 10-year Treasury note fell sharply as money flowed to more defensive assets. Economic data was mostly upbeat, with reports on both the manufacturing and services sectors topping analysts’ forecasts, as did the first read on third-quarter gross domestic product. On this week’s wild ride, Chief Investment Strategist John Lynch noted “The stock market roller coaster we’ve been on this month has understandably left many investors with white knuckles, but it’s important to keep in mind that the fundamentals of the economy and corporate America remain quite strong.”

Foreign investors didn’t fare much better, though China’s Shanghai Composite bucked the trend, rising nearly 2% on the week, which helped broad emerging markets indexes outperform their developed market counterparts. Support in Chinese stocks came in the form of government pledges to support the country’s financial markets and economy in the midst of slowing economic growth and recent concerns about the impact of forced selling by firms that used stock holdings as collateral for loans.

Another busy week of earnings announcements are set to be released, with an additional 138 S&P 500 companies slated to report. Turning to economic data, it’s mostly quiet on the Asian front, but a swath of inflation data will be released out of Europe. Looking at the U.S., the monthly nonfarm payrolls report highlights the docket with investors likely to focus on wage growth for signs of inflationary pressures. Track these and other important events on our Weekly Global Economic & Policy Calendar.

 

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