S&P 500 falls, what's next for the Fed: Market takeaways

As the trading day draws to a close, Yahoo Finance markets reporter Josh Schafer breaks down of the day's top financial trends— higlighting S&P 500's (^GSPC) downturn and the ongoing debate surrounding the Federal Reserve's upcoming monetary policy decision.

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Angel Smith

Transcripción del vídeo

Hey Josh.

Yeah.

So the S and P 500 having its worst week since that regional banking crisis in March of 2023 the NASDAQ having its worst week since 2022.

And I want to just start there.

I mean, if we're gonna talk takeaways from the week, it was a lot of red and I want to just take a look at sort of what we saw.

We'll put this on a four day because we had a holiday shortened week, NASDAQ down almost 6%.

The S and P 500 down 4/4 percent.

And when you really take a look under the hood here, Josh, we'll go to the heat map and we can see where the selling was.

It was in tech, right?

Take a look at XL K here down 7% over the last four days.

And we'll look at our big one like we always like to, we'll take a look at the NASDAQ 100.

Look at NVIDIA down almost 14%.

You're seeing a clear trend here of 16, Broadcom 16.

And that was an interesting one, Josh, because it felt like, well, Broadcom has positive earnings if they're able to maybe surpass the revenue guidance the streets expecting.

Does that reinvigorate some of the A I trade that was out there in the bloodstream and we did not get that.

And so you just saw more selling and it's just been a hardcore rotation out of tech jobs report.

Didn't help that either.

And right now I'm sort of just wondering what can stop this.

Right.

Well, we, I mean, Joshua, it's Friday.

We're heading into the weekend.

People are watching along the market, you gotta give them something.

I mean, give me some light at the end of the tunnel.

Yeah.

So we'll take a look here.

Josh, this is an interesting graph.

It's light at the end of the tunnel and also perhaps not, it's mixed, but we like mixed, right?

So what we're looking at here is data from factset.

This is earnings estimates for the current quarter.

Analysts always slash earnings estimates in the first two months.

It's typical, right?

So we're looking at 2.8% here.

What's the sort of the takeaway that's positive?

They always slash and it's not as bad as it's been in the past.

The average is 3% over the last 20 years.

So we're a little bit shy of that average.

But I did think it was interesting today, City Scott Kroner at the head of equity strategy over there said right now, earnings are looking a little bit uninspiring.

Remember last quarter, we had estimates not get slashed.

So that was when we felt a little bit better.

You had that 0.3 there.

So maybe the positive will be if people start feeling a little bit better about earnings going into earnings season in October.

I don't know, Josh, maybe there'll be something from the Apple event on Monday that gets people excited about it.

You're not a big stock mover talking about it so much, but maybe some thing to just reinvigorate a little bit of that optimism.

But to be honest, right now, we're in September seasonally, not a great month.

You have debate over the fed, you have the election coming.

It feels like we're gonna be in chop for a little bit.

You could maybe just churn here for a bit.

That's what it feels like.

And I wanna go to take two, which is, of course, the rate cut debate, right?

So we had the jobs report this morning and what you saw that sort of some key takeaways here.

You had non farm payrolls come under unemployment rate fell, but from 4.3 to 4.2.

But if you look at the rounding, it really wasn't that great.

And then overall, we saw markets kind of shift too at one point today, Josh, we were pricing in a 60% chance of a 50 basis point cut.

Now we're down to 31% after the fed speak.

It feels like this might be contributing to the market mood right now too, that, that 50 bits cut is just not coming in September.

And then you start to worry about the, is the fed offsides?

Is the fed not offsides, but maybe there's a chance this could move again.

Right.

We still have two weeks until the fed meeting.

And then we got that CP I print next week.

How important is that for the market?

Yeah, Wells Fargo had an interesting comment on this, Josh saying that they think that if we have a better than expected CP I print.

So of course, CP I is expected to rise 3.2% year over year.

Maybe if that number comes in a little bit lower and inflate, the fed can feel even more confident about inflation, then maybe this goes up and the market starts feeling like the FED can cut 50 basis points in, in September.

So it would be interesting to see if inflation keeps trending, maybe even better than the FED thinks, then maybe they can give some help on the labor market side there and do a larger cut.

All right, we'll be watching.

Thank you Joshua.