'Markets a little tired': US stocks break three-week streak of gains

The main US index S&P 500 fell at the end of the week, breaking a streak of three consecutive weeks of growth. Although on Friday American shares were able to slightly recover losses due to the data on inflation. During the week, investor sentiment was affected by statistical data on employment and GDP, as well as the decline in Oracle securities after their rise to a record. The cryptocurrency market experienced the largest loss of capitalization since March.

- Over the week, the broad market index S&P 500 lost 0.3% - this was the first decline in five trading days in the last four weeks, notes CNBC. On Friday, the index rose 0.6% to 6643.7 points.

- The blue-chip index Dow Jones Industrial Average decreased by 0.2% at the end of the week. At the same time on Friday it added 0.65% and closed at 46,247.3 points.

- The Nasdaq Composite index of technology stocks lost 0.7% over the past five days, which was also the first weekly decline in a month. The index was under pressure also due to the decline in shares of IT company Oracle by more than 8% over the week. On Friday, the index was up 0.4% to 22,484.1 points. Friday's rise interrupted a three-day decline in the stock market, but did not compensate for the losses of the entire week.

- The Russell 2000 index of small-cap stocks lost 0.6% for the week. But on Friday it strengthened by almost 1% and closed at 2434.3 points.

Strong employment data released on Thursday and the revision of the US GDP growth estimate for the second quarter to 3.8% have slightly cooled investor optimism, CNBC writes. Market participants fear that a decline in the number of applications for unemployment benefits may indicate a good state of the economy and, therefore, reduces the chances of an aggressive rate cut by the US Federal Reserve.

The August Personal Consumption Price Index (PCE), a key inflation gauge for the Fed, showed core inflation (excluding food and energy prices) at a seasonally adjusted annualized rate of 2.9%. That matched the forecasts of economists surveyed by Dow Jones. The overall index also showed an annualized increase of 2.7% and a monthly gain of 0.3% - both also in line with expectations. According to CME Group's FedWatch tool, markets are still pricing in two 0.25pc rate cuts before the end of the year, a scenario that the Fed itself is also forecasting. This data supported investors' optimism on Friday.

The consumer sentiment index in September from the University of Michigan also almost matched expectations, only slightly behind the forecast. Notably, confidence remained stable among investors with large equity investments, CNBC emphasizes.

An additional factor weakening market sentiment was the collapse of cryptocurrencies, which at their peak lost about $300 billion in capitalization over the week. Bitcoin and Ethereum, which experienced one of the most volatile weeks since the summer. And although prices stabilized on Friday, the scale of the sell-off and concerns about waning interest in cryptocurrencies by institutional investors may cool the activity of retail traders, who earlier this year managed to capture significant profits, Bloomberg notes.

"I think the markets are a little tired," PGIM Fixed Income co-investment partner Greg Peters told Bloomberg. - [But] given the recent strong growth numbers, this [decline] may be short-lived."

"After three days of market declines, the PCE data was enough to bring buyers back," TradeStation Global Strategy Director David Russell told CNBC. - "Yesterday's unemployment data and GDP revisions undermined the dovish narrative, but today's PCE numbers calmed the market a bit. The absence of bad news is already good news."

"Active traders are still willing to hunt for fast-growing stocks, especially in their favorite sectors - like anything related to AI, quantum computing and cryptocurrencies. But their appetite for buying on drawdowns and chasing rallies has really waned," Interactive Brokers chief strategist Steve Sosnek told Bloomberg. - "I don't know if you can call it indigestion anymore. It's more like a mild coma after years of feasting at the buffet table."

"The market was overbought - and especially in the superspeculative stock segment," Morgan Stanley Investment Management portfolio manager Andrew Slimmon explained the decline in the major indexes to Bloomberg. - These securities were approaching a bubble. And this is already a very alarming signal".

"It's dangerous to buy assets based solely on optimism about a Fed rate cut and the start of an easing cycle," Lara Castleton, head of portfolio construction and strategy in the U.S., told Bloomberg.

"We're balancing on a fine line - when does bad data really start hurting the market? - Neils Dillon, director of portfolio strategy and alternative investments at Lido Advisors, asks rhetorically in an interview with Bloomberg. - And that's exactly the predicament the market found itself in this week."

This article was AI-translated and verified by a human editor