The Weekly Stock Market Report (1 – 7 August 2015)Contributor JPMAM UK
US: FED APPEARS ON TRACK FOR SEPTEMBER MOVE
- Wall Street stocks slipped back in the week to 7 August. The Dow Jones fell 1.8%, while the broad S&P 500 was down 1.2% and the technology-heavy Nasdaq lost 1.7%.
- It was another challenging week for the energy and materials sectors as commodity prices continued to slide. Brent crude hit a new six-month low following six weeks of declines, while weak Chinese manufacturing data added to the downward pressure on metals prices.
- Individual stocks with exposure to China also struggled, with Apple shares falling heavily amid concerns about slowing growth in the Chinese smartphone market. Meanwhile, media stocks had their worst week since 2011 as Disney reported disappointing earnings and investors worried about the potential impact for traditional broadcasters of the shift to digital media.
- Market sentiment continued to be dominated by speculation about the timing of the first US interest rate rise since 2007, with the week’s economic data releases viewed as broadly supporting a September move by the Federal Reserve (the Fed).
- Growth in the US manufacturing sector remained sluggish in July, according to a survey by the Institute for Supply Management (ISM). However, the ISM’s non-manufacturing index for the same period pointed to the strongest service sector growth since August 2005, as new orders surged.
- July’s non-farm payrolls report suggested employment is growing steadily, with the jobless rate remaining at its lowest level since the financial crisis. The report showed that 215,000 jobs were created in the month, slightly below a revised 231,000 gain in June, while average weekly hours rose from 34.5 in June to 34.6 in July.
- The Fed said in July that it needed to see “some further improvement” in the labour market before it would raise rates, meaning the one remaining payrolls report before the US central bank’s September meeting will be crucial.
- Dennis Lockhart, president of the Atlanta Fed, said last week that he was ready to back a September rise, barring any deterioration in economic data. Lockhart is a moderate voice on the Federal Open Market Committee, tending to vote with the consensus, so his comments were viewed as providing an indication of the overall mood among policymakers.
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