Last week, the S&P 500 Index declined 0.6%, while the NASDAQ 100’s capitalization fell 0.3%. Investors remain positive about rising corporate profits, but concerns about the spread of the new strain of coronavirus continue to weigh on market sentiment. The week started with weak statistics from China. Retail sales figures for July turned out to be significantly worse than expected, which spoiled the mood of investors. The Chinese market continues to be under pressure due to ongoing reforms. On Friday, it became known that the PRC authorities have approved a bill that toughens the rules for the treatment of companies with personal data.
At the end of the week, Toyota announced its intention to cut car production at Japanese factories in September by 40% due to a shortage of semiconductor components. As far as we understand, many global automakers continue to experience a shortage of semiconductors. The current semiconductor deficit will last until at least the second quarter of 2022, when the industry can potentially begin to recover. The growing incidence and slow pace of vaccination in Southeast Asia have led to the closure of factories that produce all types of semiconductors.
The minutes of the July meeting of the Federal Reserve System were published on Wednesday. Most of the 19 members of the Federal Open Market Committee (FOMC) last month supported the desirability of starting to phase out the asset repurchase program before the end of this year. Nevertheless, it is not yet clear whether the Fed is ready to announce the gradual abandonment of the purchase of securities at the next meeting in September. Recently, more and more representatives of the FRS leadership have been supporting the curtailment of stimulus measures. For example, the President of the Federal Reserve Bank (FRB) of Boston, Eric Rosengren, said that the large-scale asset repurchase program implemented by the Fed is not suitable for the current situation in the American economy. He believes that the Fed should quickly stop buying assets to prevent companies from accumulating debt, as well as increasing inflationary pressures in the United States. Meanwhile, Fed Chairman Jerome Powell noted that it is not yet clear how the US economy will cope with the next surge in the incidence of COVID-19.
Oil prices continued to fall. Over the week, the price of Brent fell by almost 8%. Since the beginning of August, quotes have dropped by 15%, due to concerns about the spread of a new strain of coronavirus and its impact on the global economy. It is possible that the bottom of the oil market is close, but traders need some positive news regarding global economic growth.
This week, investors will be watching the annual US Federal Reserve Symposium on Thursday. Jerome Powell at the Fed symposium may signal the timing of the winding down of the bond buyback program from the open market. The preliminary August US manufacturing PMI and July home sales are due today. Sales figures for new buildings for July are due on Tuesday. US durable goods orders for July will be released on Wednesday. On Thursday, the estimate of US GDP for the second quarter will be released. On Friday, there will be statistics on spending and income of the US population for July, as well as an updated index of consumer sentiment in the US from the University of Michigan for August.