Weekly Market Roundup
The week's headline event was the Federal Reserve's decision Wednesday to raise rates 25 basis points to 3.75%-4.00%, its first hike since 2023, in a unanimous 12-0 vote. Chair Warsh said inflation "is too high and has been for too long," calling the move "serious and responsible," and the Fed's dot plot showed 16 of 18 members expecting at least one more hike before year-end. Markets sold off into the decision, with the Dow falling roughly 600 points Monday as hike expectations solidified, and the reaction afterward split sharply: the Dow fell for a third straight week, dragged down by financials and other rate-sensitive names, while the Nasdaq eked out a gain as AI-linked semiconductor and crypto-adjacent stocks rallied even after the hike. For the week, the S&P 500 slipped -0.06%, the Nasdaq added +0.73%, the Dow dropped -1.95%, and the Russell 2000 fell -1.47%.
Treasury yields surged globally on the hawkish tilt: the 10-year briefly topped 5% intraweek before easing to end near 4.94%, with the 2-year at 4.67% and the 30-year at 5.29%. Japan's 10-year yield hit its highest level since 1996, and the U.S. and U.K. 10-years touched their highest since 2007, underscoring how broad this move was. The Bloomberg US Aggregate was roughly flat on the week (-0.03%) but remains down -1.47% for the year. The U.S. Dollar posted its best week in three months (+1.1%) as the hike tightened global dollar liquidity, and the VIX stayed contained, closing the week at 14.81.
A separate note this week also flagged early signs of a tightening labor market: August wage growth accelerated to 4.1% (from 3.8% in July and 3.5% in May), and workers who switched jobs are now out-earning those who stayed, alongside more job openings and low unemployment. It's only a few months of data, but it's a rate-of-change signal worth watching, since a tighter labor market historically leans hawkish for Fed policy. International equities also slipped, with the MSCI ACWI Ex-USA index down -1.15% on the week, though it remains up +15.20% year-to-date.
With the Fed decision behind us, this week's calendar is comparatively lighter. Tuesday brings the ADP employment report and a 2-year Treasury note auction. Wednesday features S&P Global's Manufacturing and Services PMIs along with weekly crude oil inventories. Thursday's data includes initial jobless claims, building permits, and new home sales. The week wraps up Friday with durable goods orders, the Atlanta Fed's GDPNow estimate, and the University of Michigan's consumer sentiment survey. Markets will likely focus on how growth and inflation data evolve from here, particularly given the sharp move higher in global bond yields.
This was the week we'd been building toward for months: the Fed's first rate hike since 2023 arrived largely as expected, but the market's reaction told a more interesting story than the decision itself. The split between a struggling Dow and a resilient Nasdaq suggests investors aren't fully aligned on how this hike, and the ones the Fed's own dot plot suggests may follow, will ultimately affect earnings and valuations.
We would resist reading too much into any one week's sector rotation. Higher borrowing costs are a real headwind for rate-sensitive and more leveraged businesses, but strong underlying earnings, particularly among the AI and technology names that carried the Nasdaq this week, can offset that pressure for a while. The bigger question, in our view, is whether the recent tightening in the labor market persists; if it does, it strengthens the case for further Fed hikes and argues for continued patience and quality over reaching for yield or beta.
We remain diversified across market capitalizations, sectors, and geographies. As always, we believe the best way to navigate a well-telegraphed but still consequential shift like this one is through a disciplined, long-term approach rather than reacting to any single week's headlines.
If you have any questions about the above, please reach out to us to set up a one-to-one meeting so we can review your situation.
Sincerely,
President
SBC Investment Management
P: (602) 641-5996 · M: (319) 520-2033 · E: bandrus@sbcinvestmentmanagement.com
Investment Analyst, Junior Portfolio Manager
SBC Investment Management
P: (435) 775-2950 · M: (435) 590-8317 · E: jrehkop@sbcinvestmentmanagement.com