The S&P 500 (SP500) on Friday slipped 0.04% for the week to end at 5,344.16 points, posting gains in three out of five sessions. Its accompanying SPDR S&P 500 ETF Trust (NYSEARCA:SPY) inched up 0.02% for the week.
Wall Street’s benchmark index has now notched a four-week losing streak for the first time since September 2023. And what a wild week it was, to say the least! The S&P (SP500) on Monday cratered 3% amid a global rout in equities, and then proceeded to erase all those losses over Tuesday to Friday.
That push wasn’t enough to end the week in green, but the S&P’s (SP500) eventual 0.04% loss was a much better performance than last week’s 2% retreat. In fact, it was the gauge’s smallest weekly decline in over six years.
It didn’t look like it would make it to a weekly positive finish on Monday, though. A brutal wave of selling gripped markets across the world, leading to “Black Monday” comparisons and a sense of gloom and doom. One of the primary drivers of the rout was the recession worries sparked by last week’s U.S. nonfarm payrolls report.
The other reason concerns Japan. A surprise interest rate hike by the Bank of Japan (BoJ) on July 31, and an unwinding of the so-called “yen carry trade” led to the Asian nation’s benchmark Nikkei 225 (NKY:IND) plunging more than 12% on Monday. A carry trade is when traders borrow in a low-yielding currency and invest the proceeds in higher-yielding assets in a different currency.
“Last week’s weak U.S. payroll report combined with rising jobless claims induced fears of U.S. recession. At the same time, the latest BoJ rate hike induced fears of broader unwinding of the Japanese yen carry trade which had previously been used to fund both Japanese and foreign assets. The combined effect of rising U.S. recession risk and unwinding of the broader Japanese yen carry trade triggered a correction in risk assets in particular equities and a rally in safe assets such as government bonds, the yen and Swiss franc,” JPMorgan’s Nikolaos Panigirtzoglou summed it up on Wednesday.
The rest of the week saw the S&P (SP500) stage a solid rebound. After ending higher on Tuesday, the benchmark index stumbled on Wednesday after a weak $42B 10-year note auction.
It recovered with a remarkable 2.30% advance on Thursday, as investors received their first reading on the labor market since the July jobs report in the form of initial jobless claims data. The number of Americans filing for unemployment benefits in the past week declined by their largest level since September last year, which in turn helped becalm recession fears.
The focus now returns to inflation, with the July consumer price index and producer price index reports scheduled next week.
Amid all the selloff drama, the second quarter earnings season continued to chug along this week. Notable names and their performances included ride-hailing giant Uber’s (UBER) 19% Y/Y growth in gross bookings, industrial bellwether Caterpillar’s (CAT) improved annual profit outlook, vacation rental firm Airbnb’s (ABNB) weak current quarter guidance, and theme park and entertainment behemoth Walt Disney’s (DIS) combined streaming assets achieving a quarterly profit for the first time.
Turning to the weekly performance of the S&P 500 (SP500) sectors, six of the 11 ended in the red, with Consumer Discretionary and Information Technology falling more than 4% each. Utilities led the gainers. See below a breakdown of the performance of the sectors as well as their accompanying SPDR Select Sector ETFs from August 2 close to August 9 close:
#1: Industrials +1.20%, and the Industrial Select Sector SPDR Fund ETF (XLI) +1.26%.
#2: Energy +1.17%, and the Energy Select Sector SPDR Fund ETF (XLE) +1.14%.
#3: Communication Services +0.79%, and the Communication Services Select Sector SPDR Fund (XLC) +0.55%.
#4: Financials +0.55%, and the Financial Select Sector SPDR Fund ETF (XLF) +0.81%.
#5: Real Estate -0.16%, and the Real Estate Select Sector SPDR Fund ETF (XLRE) -0.12%.
#6: Information Technology -0.23%, and the Technology Select Sector SPDR Fund ETF (XLK) +0.44%.
#7: Consumer Staples -0.29%, and the Consumer Staples Select Sector SPDR Fund ETF (XLP) -0.14%.
#8: Health Care -0.62%, and the Health Care Select Sector SPDR Fund ETF (XLV) -0.58%.
#9: Utilities -0.94%, and the Utilities Select Sector SPDR Fund ETF (XLU) -0.82%.
#10: Consumer Discretionary -1.01%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) -1.03%.
#11: Materials -1.68%, and the Materials Select Sector SPDR Fund ETF (XLB) -1.64%.
For investors looking into the future of what’s happening, take a look at the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.
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