The overhang of Fed Chair Powell’s Jackson Hole speech the previous week carried over into last week as investors recalibrated stock valuations amid a seemingly more assertive monetary policy stance.
The Dow Jones Industrial Average fell 2.99%, while the Standard & Poor’s 500 stumbled 3.29%. The Nasdaq Composite index lost 4.21%. The MSCI EAFE index, which tracks developed overseas stock markets, slid 4.90%. 1,2,3
Stocks Extend Losses
Investors remained unnerved by the aggressive tone of Jerome Powell’s speech and subsequent comments from Fed officials suggesting a higher rate hike than the market expected at the Fed two-day meeting ending September 21. The probability of a 75 basis point hike in September rose to nearly 65%, up from just 28% a month ago. 4
Stocks moved steadily lower before finding some footing on Thursday. Friday’s employment report appeared to strike a “goldilocks” note (i.e., labor gains not so strong that it might trigger greater Fed hawkishness but robust enough to allay imminent recession fears). After early gains, stocks turned lower ahead of the holiday weekend.
Employers added 315,000 jobs in August, maintaining the labor market’s remarkable resiliency amid a contracting economy. The unemployment rate rose to 3.7%, up from last month's 3.5%. The gain followed an uptick in the labor participation rate, which expanded from 62.1% to 62.4%. Wages continued to grow, rising 0.3% in August and 5.2% from 12 months ago. 5
Sectors seeing the most significant increases in new jobs were professional and business services, healthcare, and retail. Lagging sectors were manufacturing, financial, and wholesale trade. 6
This Week: Key Economic Data
Tuesday: Institute for Supply Management (ISM) Services Index.
Thursday: Jobless Claims.
Source: Econoday, September 2, 2022
This Week: Companies Reporting Earnings
Thursday: Zscaler, Inc. (ZS), Docusign (DOCU).
Friday: The Kroger Co. (KR).
Source: Zacks, September 2, 2022
What to Do If You Get an Identity Theft Letter From the IRS
The IRS can scan tax returns for potential fraud, and if a tax return seems suspicious, they will flag it for further review. In these cases, the IRS will send the taxpayer a letter notifying them of potential identity theft. Because the tax return won’t be processed until you respond to the letter, it’s essential to follow the steps outlined. The letter will likely have everything you need to know.
The three different types of identity theft letters that the IRS may send out include:
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov 7
A sudden noise startles a gopher, an owl, and a skunk at the edge of a forest. The owl flies off and the gopher retreats into his burrow, but the skunk runs for the trees. How far can that skunk run into the forest?
Last week’s riddle: What can run but never walks, has a mouth but never eats, has a head but never thinks, and has a bed but never sleeps? Riddle answer: A river.
Footnotes and Sources
2. The Wall Street Journal, September 2, 2022
3. The Wall Street Journal, September 2, 2022
4. The Wall Street Journal, August 29, 2022
5. CNBC, September 2, 2022
6. CNBC, September 2, 2022
7. IRS.gov, April 12, 2022
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Weekly Market Insights: Markets Sag, Job Numbers Soar
September 06, 2022