Markets Close a Strong August
August ended better than many feared. Traders worried each month of summer trading would bring a lasting pullback, but that never happened. The final day looked soft, with some pressure in the morning, yet the month still tracked for a win.
The S&P 500 and NASDAQ Composite were headed for their first monthly gains since about May, up 3% and 4%. Both the S&P 500 and the Dow hit all-time highs earlier in the month. Gains were led by tech: the S&P 500 tech sector rose nearly 6% for August. Nvidia (NVDA) spiked on the back of its earnings and was up about 8%. Microsoft (MSFT) and Micron (MU) advanced roughly 10% and 13%.
Oil Rises on U.S.-Iran Fighting
Oil prices jumped after hostilities between the U.S. and Iran resumed. U.S. Central Command confirmed that two U.S. rockets struck near launch sites on Iran's Larak Island. Sunday's attacks were the first publicly acknowledged U.S. strike on Iranian positions since at least late July. Iranian state media reported attacks on U.S. bases in Jordan in retaliation. There had been earlier points where it looked like fighting in Iran would resume, and now that is confirmed. Rising Middle East tensions added to the overall market volatility during August.
Inflation and Yields
August was volatile. Inflation fears sent Treasury yields to multi-year highs. The Treasury tried to slow the sell-off by saying it would increase its debt repurchases, which caused some back-and-forth. Kevin Warsh, speaking last Friday, said he is worried about inflation. He noted that while summer inflation readings came in better than expected, they do not show that underlying demand has meaningfully improved.
The Week Ahead
This is a pivotal week, with key earnings still coming out and the jobs report on Friday. Friday morning's report is the critical economic read. Also due are jobless claims and Challenger job cuts.
Last month's jobs report came in weaker than expected. Non-farm payrolls softened, but unemployment ticked down to around 4.3%. Even that objectively weaker number drew a positive market reaction. The labor market has stayed fairly resilient. Government hiring has remained relatively stable.
Volatility already looks priced into markets, but the numbers could still surprise. If non-farm payrolls keep failing to grow at the pace the market expects, that would mark two back-to-back months of weakness, which is a concern. That will only be clear once Friday's numbers arrive.
