Stocks Down On Friday And For The Week  Image: Bigstock Stocks closed lower on Friday, and ended their weekly winning streak as well. Going into last week, the S&P, Nasdaq, and Russell 2000 had all been up for 4 weeks in a row (3 of the last 4 weeks for the Dow). They were looking good again last week, until Friday. There was nothing in particular that happened on Friday to sink stocks. But after a 23% rally in the Nasdaq and Russell over the last 2 months, and a 17% rally in the S&P, there was bound to be some profit taking eventually. And with the effective end to earnings season, Friday was as good a time as any. Last Week's FOMC Minutes didn't help either as it just bred more uncertainty over the Fed's next moves on interest rates at their September 20-21 meeting. While the Fed seemed quite committed to raising rates until inflation is under control (i.e., feeling confident that it is on its way back down to 2%), their discussion that raising rates too much could 'have a larger negative effect on economic activity than anticipated,' had some questioning just how committed they will be after all. One look at the 10-year Treasury yield shows this doubt. Just prior to the Fed's July meeting, where they raised rates by another 75 basis points, the yield hit a high of 3.483, But since then, it has fallen to a low of 2.618. That's a decline of -24.8%. It has bounced off its lows and is now at 2.989. But that's still a far cry from the 3.483 level. Especially given the Fed's own comments that they expect to see the Fed Funds rate between 3-3.5% (the midpoint is at 2.38% now). If traders truly believed that, they would not have driven yields down like that. Now, that doesn't mean traders won't change their mind and run yields back up. But the volatility in the yield underscores the uncertainty over rates, and just how high they think the Fed is actually willing to go. In other news, E-Commerce Retail Sales came in at 2.7% vs. last month's 2.4% and views for 2.6%. And the Quarterly Services Survey showed Selected Services Revenue up 2.2% m/m vs. last month's upwardly revised 1.6%. On a y/y basis it was up 10.2% vs. last month's y/y pace of 11.6%. Information Revenue was up 3.1% q/q vs. last month's -3.1%. On a y/y basis it was up 9.6% vs. last quarter's y/y pace of 11.8%. We'll have a slew of new economic reports on deck this week. We'll also hear from Fed Chair, Jerome Powell, this week when he gives a speech at the Jackson Hole conference on Friday, August 26. With the September 20-21 Fed meeting a month away, traders will be listening to every word Mr. Powell has to say to glean any insight on what they'll do in September. In the meantime, both the Nasdaq and the Russell 2000 have exited their bear market and have begun a new bull. And the S&P is only a few percent away from doing the same. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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