The Week on Wall Street
Stocks ended last week with modest losses, masking a volatile five-day trading period that saw investors embrace recession concerns and then dismiss the slow-down talk as speculation as the week progressed.
The Dow Jones Industrial Average slipped 0.60 percent, while the Standard & Poor’s 500 Index ended flat (-0.04 percent). The Nasdaq Composite dipped 0.18 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 1.21 percent.1,2
Stocks Stage Comeback
Monday was the worst day for the S&P 500 and the Dow in nearly two years. As recession talk grew louder, investors took a “risk off” position.
On Monday, the Japanese market had its worst drop since 1987 as market participants unwound positions from a popular trading strategy called a “carry trade” amid a global sell-off in stock prices.3
But on Thursday, initial jobless claims fell less than expected—a positive sign for the labor markets— which quieted some of the recession talk. Also, as the week progressed, there was growing speculation that the July jobs report was more of an outlier than a leading indicator of a pending recession.
By Friday’s close, all three major averages had regained most of the week’s losses.4
Mortgage Update
Last Thursday, the average rate on a 30-year fixed mortgage dropped to 6.47 percent—a 15-month low. Many home buyers welcomed the news, and it appeared to help support Thursday’s rally.5
But the announcement left some wondering whether rates would continue to trend lower. Mortgage rates are tied to the interest rates set by the Federal Reserve. Some speculated the drop was due to market participants anticipating the Fed would adjust rates in September, which remains anything but certain.6
Weekly Riddle
There are three cups of flour on a counter, and you take one away. How many cups of flour do you have now?
Last week’s riddle: A cat falls into a hole 14.5 feet deep. The cat can jump 3 feet high, but she slides back 1 foot with each jump. How many jumps does it take her to get out of the hole?
Answer: Every 3-foot jump accompanied by a 1-foot slide equals jumps of 2 feet high each; at that rate, the cat’s seventh jump, starting at 12 feet, will leave her 15 feet above the bottom of the hole so that she may escape.
John Dombroski Jr. may be reached at (480) 991-1055 or [email protected]
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