Market Commentary From Our Partners At Foundations

Market Commentary From Our Partners At Foundations

August 22, 2022

Market Recap week ending 8/19/2022

US equities and bonds ended the week lower in an erratic fashion. Technically, the S&P 500 failed to surpass it's 200- day moving average, which gave reason for investors to take profits. The S&P 500 had gained nearly 19% over the last two months and seemed overbought and ready for a pullback. Meme stocks bore the brunt of the sell-off with Bed Bath and Beyond, showing how millions can be made and lost in nonsensible trading. Growth names sold off as the US yield curve steepened. Fed rhetoric throughout the week remained hawkish, with some Fed Presidents calling for a 75 basis point hike. At the same time, another President conceded that the Fed would need to put the economy into a recession to curb inflation.

Q2 earnings continued to be a mixed bag. Walmart surprised the street with better than expected results, while Target and Kohl's results were disappointing. Cautious commentary on the next few quarters from ADI and AMAT, semiconductor equipment companies, also hindered market sentiment. Global economic data showed weakening retail sales and industrial production in China and record levels of inflation in the UK and Germany. US economic data showed benign retail sales and evidence that the housing market is cooling off. 

The S&P 500 lost 1.2%, the Dow fell by 0.2%, the NASDAQ gave up 2.6%, and the Russell 2000 shed 2.9%. The US yield curve steepened but remains inverted. The 2-year note yield was unchanged on the week closing at 3.25%. The 10-year bond yield increased by fourteen basis points to 2.99%. Oil prices fell 1.6% or $1.52 to $90.82 a barrel. Gold prices fell 2.8% or $52.30, closing at $1762 an Oz.  Copper prices were unchanged for the week at 3.66 an Lb. Bitcoin fell over 13% on the week to $21,256 as risk assets lost favor. The dollar strengthened meaningfully against the British Pound, the Euro, and the Japanese Yen. 

In the US, retail sales for July were unchanged from June. Retail sales Ex-autos came in better than expected at up 0.4%. Housing starts fell to 1446K versus the street expectation of 1550k. Building permits were better than expected at 1674k. Existing Home Sales fell to 4.81 million versus an estimate of 4.91 million. Mortgage applications fell by 2.3% from last week. The National Association of Home Builders market index declined to 49; a reading of less than 50 indicates negative sentiment. Of note, the index has now fallen for the last eight months. Initial claims came in a touch better than expected at 250K, and Continuing Claims increased slightly to 1437K.

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