The week ended on a mixed note for Wall Street, with major indices showing minimal changes as investors remained cautious ahead of insights on interest rates from the Federal Reserve. The Nasdaq Composite slipped by 0.2%, the S&P 500 barely moved with a 0.01% decline, while the Dow Jones Industrial Average inched up by 0.08%.
Amidst global markets hovering near two-month lows, the MSCI world equity index, tracking shares across 45 countries, registered a 0.24% decline at the latest check.
After a recent surge, benchmark US 10-year Treasury yields experienced a decline, settling from their 16-year highs earlier in the week. Investors speculated that the robust US economy could prompt the Federal Reserve to maintain higher interest rates for an extended period.
According to Blake Emerson, a global investment specialist at JP Morgan Private Bank, “August historically has been a weak month for markets, and it isn’t surprising that after a big rally to start the year, investors would take a breather. The headlines haven’t changed all that much, but the lens with which investors are viewing those headlines has,” as reported by Reuters.
Despite touching a peak of 4.328% on Thursday, 10-year yields subsided to 4.255%. A breakthrough beyond the 4.338% level recorded in October would mark the highest yields since November 2007.
The dollar index, reflecting the currency’s performance against a basket of six major rivals, dipped by 0.16%. Despite its daily decline, the dollar notched its longest winning streak in 15 months with a sixth consecutive week of gains.
Recent minutes released from the Federal Reserve’s July meeting revealed that committee members continued to acknowledge strong upside risks to inflation. This suggests the possibility of upcoming rate hikes to control inflation.
All eyes are now on the annual meeting of the Federal Reserve and other major central banks in Jackson Hole, Wyoming. Next Friday, Fed Chair Jerome Powell is anticipated to deliver a speech, closely observed by investors for signals about the future trajectory of interest rates.
TD Securities analysts noted, “We view the event as a good opportunity for Powell to start laying the ground for the next step in the Fed’s policy guidance: no longer focused on how many hikes to expect, but rather on rates remaining ‘higher for longer,'” as reported by Reuters.