US Stock Market Weekly Wrap: Nasdaq Crashes 600 Pts; Dow Jones, S&P 500 Fall 1-1.5%; What Hit Wall Street Hard

The US stock market recorded a weekly crash between the August 17th to 21st trading sessions, with the Nasdaq Composite index taking the worst hit. Even the Dow Jones and S&P 500 plunged by 1% to 1.5%. Geopolitical developments in West Asia, along with elevated crude oil prices and treasury yields, continued to tighten the bullish trend on Wall Street. While on the last trading day of the week, all indices witnessed healthy buying but could not escape weekly declines. Investors are cautious as they unwind the macro impacts on the economy. Also, US national debt topped $40 trillion, another concerning factor.

Dow Jones + Nasdaq Composite + S&P 500

On August 21st, the Nasdaq Composite surged by 113.29 points or 0.43% to close at 26,180.46. While the S&P 500 index rose by 33.21 points or 0.43% to end at 7,674.37. But it was the Dow Jones Industrial Average or DJIA that outperformed its counterparts with gains of 517.80 points or 0.98% to end the week at 53,277.01.

Explaining the Friday's performance, Trading Economics data pointed out that equities advanced after a report showed US business activity grew at its fastest pace in more than four years. Meanwhile, markets continued to assess a recent surge in bond yields driven by inflation and fiscal concerns. Long-dated Treasury yields remained near levels seen before the Treasury announced a larger bond buyback, while the dollar extended its decline.

Among the stocks, Hyperscalers recorded buying momentum on Friday with Alphabet up 1.1%, Microsoft gained marginally by 0.4%, while Meta rose 0.8%. However, chipmakers traded on a mixed note, with Nvidia dropping 1%, Micron lost 0.8% and Intel plunged 2.2%. Further, Walmart crashed by more than 10% on the week after a rare earnings miss weighed on its outlook and raised concerns over US consumers.

Despite Friday's rally, US indices ended the week broadly bearish.

US Stock Market Weekly Performance

From August 17-21, the Dow Jones tumbled 386.10 points or 0.72% and the S&P 500 index plummeted by 116.31 points or 1.49%. But the tech-heavy index, Nasdaq took the worst beating, by crashing 604.20 points or 2.3%.

The Morningstar US Total Market Index fell 1.48%. Further, Morningstar pointed out that the worst-performing sectors were industrials, down 4.23%, and utilities, down 3.65%. While large-cap stocks fell 1.48%, mid-cap stocks fell 1.82%, and small-cap stocks fell 1.46%. Also, growth stocks tumbled 2.03%, blend stocks fell 1.48%, and value stocks fell 0.76%. Of the 882 US-listed companies covered by Morningstar, 380, or 43%, were up, none were unchanged, and 501, or 57%, were down.

This is due to sharp rebound in treasury yields.

US Treasury Yields:

The 10-year benchmark US Treasury yield is now testing a 20-month high after it reached at 4.74% on Friday. The yields rebounded from their weekly decline despite the US Treasury Department planning to double the size of their bonds buyback to $4 billion from earlier $2 billion in the next quarter.

Also, the 30-year treasury yield jumped back to its highest level since 2007 to 5.2%, signaling concerns of inflationary pressures in the longer run.

The rise for the 30-year tenure led the movements among Treasuries following controversial statements by Fed Chairman Warsh during the press conference. The reluctance to signal a rate hike as the Fed's preferred response to inflation drove long-dated yields to surge, even though those on shorter maturities fell. The Chair also signaled a positive response in seeing long-term yields rise in Q2, akin to a policy tool, also limiting the urge for a rate hike. Underlying inflation gauges in the US flared higher in Q2 after tariffs and soaring energy prices lifted costs among various industries in the second quarter, as per Trading Economics.

US Dollar Index + Crude Oil Prices

Meanwhile, the US dollar index ended 1% weekly gains to hold around 98.8 despite having a volatile week.

Apart from this, crude oil prices remained elevated and surged over 5% this week. The US WTI crude oil futures climbed more than 5% for the second consecutive week to hit above $94 per barrel mark on Friday before correcting to above $87 per barrel. Brent crude reached as high as $97 per barrel this week before closing elevated above $94 per barrel. Both crude have recorded second weekly gains.

On the global front, Ajit Mishra - SVP, Research, Religare Broking said, geopolitical developments and elevated crude oil prices remained the dominant drivers of market sentiment. Ongoing tensions in West Asia continued to raise concerns over potential disruptions to global energy supplies, keeping crude prices elevated.

He added that rising global bond yields also reduced expectations of aggressive monetary easing, prompting a more cautious approach towards risk assets. Investors are therefore closely monitoring the US Federal Reserve's policy outlook, particularly ahead of the Jackson Hole symposium, where monetary policy guidance is expected to remain a key global market catalyst.

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