August Market Recap
Stocks opened August with a broad selloff following an underwhelming jobs report (see chart below), reigniting concerns that the economy may be cooling off. The market quickly regained its footing, however, buoyed by several high-profile IPOs and a dovish pivot in Fed policy by Chairman Powell.
Still, signs of fatigue are emerging – particularly in the tech sector. At current levels, it will take a lot more than good earnings and maintaining the status quo for the market to go higher. For example, Nvidia recently reported record sales, but investors were not satisfied.
Safe-haven Treasuries yields spiked again with the long-term yields approaching 5%, signaling market concern for inflation.
What Is Happening to Jobs?
July’s employment report was disappointing for several reasons. In addition to the headline number of 71,000 coming in well below expectations, substantial downward revisions to May and June payroll growth totaling 258,000 heightened concerns about the health of the labor market.
Meanwhile, continuous claims have gradually crept up to a three-year high of 1.97 million, and job openings slipped below 7.5 million.
Companies Are Done Eating Up Tariff Costs
The most recent inflation report shows a modest increase in prices. According to Bloomberg citing the Associated Press, appliances rose at the fastest pace in nearly five years, toys posted their sharpest increase since early 2021, and household furnishings and sporting equipment climbed at the most rapid pace since 2022.3
Businesses offset the tariff impacts earlier this year by stockpiling goods and absorbing costs internally. However, those measures are not effective long-term solutions, and companies are beginning to pass costs along to consumers. Examples include:
- Walmart, Costco, and Target raising prices
- Nike implementing “surgical” price hikes, with Adidas expected to follow
- Mattel increasing prices on toys in May
- Proctor & Gamble signaling expected price increases in select categories and markets
- Home Depot preparing to adjusting prices
- Automakers anticipating higher vehicle costs
Investors should watch this coming holiday season closely, as spending patterns will serve as a barometer for how consumers adapt to higher prices.
