Stock prices drop, particularly in technology sectors; the U.S. dollar loses strength amidst expectations of a Federal Reserve interest rate reduction
The global financial landscape experienced a slight downturn this week, with major indices seeing decreases, as traders price in a high probability of a Federal Reserve interest rate cut next month.
In the United States, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all experienced decreases on Friday. The Dow Jones, however, managed a 3.2% rise for the month, while the S&P 500 and Nasdaq added 1.9% and 1.6% respectively. The tech-heavy Nasdaq fell more than 1% and the S&P 500 technology index fell 1.6% on Friday, contributing to the broader tech selloff that saw Nvidia and Broadcom drop 3.3% and 3.6% respectively.
The U.S. Personal Consumption Expenditures Price Index (PCE) rose 0.2% in July, according to the latest data. Over the past 12 months, PCE inflation increased 2.6%. The core PCE Price Index, which excludes food and energy components, increased 0.3% in July and 0.3% in June.
The anticipation of interest rate cuts has been fuelled by statements from Fed Governor Christopher Waller, who wants to start cutting interest rates next month and expects multiple rate reductions within the next three to six months to bring the rate closer to a neutral level around 3%. Art Hogan, chief markets strategist for B. Riley Wealth, also weighed in, stating that the data leaves the door wide open for the Fed to cut rates in September and potentially again in October and December.
European shares closed lower, hitting their lowest in over two weeks. The pan-European STOXX 600 index fell 0.64%, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all experiencing decreases on Friday. MSCI's gauge of stocks across the globe fell 0.50%.
Oil prices were lower, with U.S. crude falling 59 cents to settle at $64.01 a barrel and Brent declining 50 cents to settle at $68.12.
In other news, the yield on benchmark U.S. 10-year notes rose 1.6 basis points to 4.223%, while the two-year note yield was down 1.6 basis points on the day, but has fallen 33 basis points this month. Spot gold rose 0.88% to $3,446.75 an ounce.
Meanwhile, a federal judge will set an expedited briefing schedule in the bid to temporarily block U.S. President Donald Trump from firing Fed Governor Lisa Cook.
Longer-dated yields edged higher in Treasuries, but Dell Technologies dropped 8.9% due to high manufacturing costs for artificial intelligence-optimized servers.
The markets will remain closed on Monday for the Labor Day holiday.
