Weekly Market Commentary: Powell comments spur sell-off on Wall Street

The Week on Wall Street

A comprehensive sell-off on Friday following comments by Fed Chair Jerome Powell drove stocks to losses for the week.

The Dow Jones Industrial Average tumbled 4.22%, while the Standard & Poor's 500 dropped 4.04%. The Nasdaq Composite index fell 4.44% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.10%.1,2,3

Under Pressure

Stocks dropped on Friday following Powell's remarks reiterating the Fed's inflation-fighting resolve. While his comments did not break new ground, markets reacted severely, perhaps on worries that interest rate hikes may continue into next year.

After starting the week sharply lower on renewed rising interest rates and economic slowdown fears, markets staged a modest turnaround beginning mid-week. Stocks rallied on Thursday, sparked by a revised Gross Domestic Product estimate showing the economy's shrinking less than initially estimated. Thursday's rally also got a boost from regional Federal Reserve Bank presidents, who suggested future rate hikes may be in line with market expectations.

Powell at Jackson Hole

In his much-anticipated speech at the Jackson Hole Economic Symposium, Powell unflinchingly reaffirmed the Fed's commitment to raising rates to lower inflation, even if it results in causing pain to individuals and businesses.

Wall Street focused on Powell's presentation in the hope it might provide greater clarity on future Fed direction, though his remarks ultimately went no further than restating past communications. Powell commented, "We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to two percent." This statement may have put to rest any thoughts that the Fed would soon pivot on rate hikes.4

This Week: Key Economic Data

Tuesday: Consumer Confidence. Job Openings and Turnover Survey (JOLTS).
Wednesday: Automated Data Processing (ADP) Employment Report.
Thursday: Jobless Claims. Institute for Supply Management (ISM) Manufacturing Index.
Friday: Employment Situation. Factory Orders.

Source: Econoday, August 26, 2022 - The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

This Week: Companies Reporting Earnings

Tuesday: Best Buy Co., Inc. (BBY), HP, Inc. (HPQ).
Thursday: Broadcom, Inc. (AVGO), Hormel Foods Corporation (HRL).

Source: Zacks, August 26, 2022 - Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

1. https://www.wsj.com/market-data
2. https://www.wsj.com/market-data
3. https://quotes.wsj.com/index/XX/990300/historical-prices
4. https://www.wsj.com/articles/feds-jerome-powell-set-to-speak-on-economic-outlook-at-jackson-hole-11661476059?mod=hp_lead_pos1&mod=hp_lead_pos1

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.