DJIA: 52,573.29 | NASDAQ: 26,333.04 | S&P 500: 7,656.98 | 10-Year Treasury Yield: 4.974% | 30-Year Treasury Yield: 5.354% | Oil / Brent Crude: $104.67 per barrel
U.S. stocks rebounded Friday after four consecutive days of declines. The Dow gained 1.0%, the S&P 500 gained 0.9%, and the Nasdaq gained 1.0%. Despite Friday’s recovery, all three major indexes finished the week lower. The Dow declined 1.6%, the S&P 500 fell 0.8%, and the Nasdaq declined 0.7% for the week.
Treasury yields remained elevated, with the 10-year yield near 4.97% and the 30-year yield around 5.35%. Brent crude ended near $104.67 per barrel after moving above $100 during the week. Higher oil prices are adding pressure to inflation, while higher Treasury yields continue to affect borrowing costs for households and businesses.
Fixed Income Desk
Higher Treasury Yields Keep Borrowing Costs Elevated
The bond market was under pressure this week as investors reacted to higher inflation and expectations for Federal Reserve action. The 10-year Treasury yield reached about 4.97%, briefly approaching the 5% level, while the 30-year yield remained above 5.3%. These are important rates because Treasury yields influence many other borrowing costs throughout the economy.
Higher yields can make mortgages, business loans, auto loans, and other forms of credit more expensive. Investors are also watching government borrowing and inflation closely because both can affect long-term interest rates.
Takeaway: Higher Treasury yields generally mean borrowing money remains expensive for businesses and consumers.
Capital Markets Trend
NASDAQ-100 Index
The NASDAQ-100 Index is a stock market index that tracks the performance of 100 of the largest non-financial companies listed on the Nasdaq Stock Market. It spans a wide range of industries, including technology, industrials, retail, telecommunications, biotechnology, healthcare, transportation, media, and services. The index is limited to companies listed on the Nasdaq Stock Market and does not include financial companies.
The NASDAQ-100 uses a modified market-capitalization-weighted approach. This means that the weight of each company in the index is generally based on its market capitalization, but certain rules limit the influence of the largest companies. Nasdaq periodically reviews and rebalances the index to keep it diversified and prevent any single company from having a disproportionate effect on the index’s performance. This makes the NASDAQ-100 an important indicator for investors interested in the performance of some of the largest non-financial companies listed on Nasdaq.
Nasdaq conducted a special rebalancing of the NASDAQ-100 on July 24, 2023. The weights of the component companies were adjusted to reduce the index’s concentration in a small number of very large companies. Under Nasdaq’s rules, a special rebalance can occur when companies with individual weights above 4.5% collectively represent more than 48% of the index.
Before 2023, Nasdaq had conducted special rebalancings of the NASDAQ-100 in 1998 and 2011. The 2023 special rebalance was triggered after strong gains in several large technology and consumer companies caused the combined weight of the largest companies to exceed the applicable threshold. The rebalance reduced the weights of some of the largest companies and increased the weights of other companies in the index.
The special rebalance was expected to affect the performance and volatility of the index and its individual components because some investors may have adjusted their portfolios to reflect the new index weights. Although the market experienced some short-term weakness following the rebalance, it is difficult to determine whether the decline was directly caused by the rebalancing or by broader market conditions. By October 2023, the market had generally moved higher.
The NASDAQ-100 represents companies across a variety of sectors, including:
- Technology
- Consumer Discretionary
- Healthcare
- Industrials
- Telecommunications
- Consumer Staples
- Basic Materials
- Utilities
- Energy
- Real Estate
The NASDAQ-100 focuses on the 100 largest non-financial companies listed on the Nasdaq Stock Market that meet the index’s eligibility requirements. Because it includes companies from several industries, the index provides a broad view of large, non-financial companies listed on Nasdaq, although it remains heavily influenced by technology and other growth-oriented businesses.
Investors seeking exposure to many of these large companies can gain access through financial products designed to track the NASDAQ-100, including exchange-traded funds (ETFs), mutual funds, futures, and options. Understanding the NASDAQ-100 can help investors and students of the capital markets understand how large technology and growth-oriented companies can influence the broader stock market.
View From Wall Street
Stocks Recover Friday but Finish the Week Lower
Wall Street experienced a volatile week as investors reacted to inflation, oil prices, and rising Treasury yields. Friday’s market rebound was helped by falling oil prices and inflation data that came close to expectations. The Dow closed at 52,573.29, the S&P 500 at 7,656.98, and the Nasdaq at 26,333.04.
Technology stocks continued to show resilience, but higher interest rates remain a concern for growth-oriented companies. Investors are also watching corporate earnings and AI-related spending to determine whether strong business performance can continue to support stock prices.
Takeaway: Stocks remain resilient, but higher interest rates and energy costs are creating more uncertainty for investors.
Economic Data Recap
| Report | What Happened | Why It Matters |
|---|---|---|
| CPI / Inflation | Consumer prices increased 0.4% in August and 3.4% over the past year. | Inflation remains above the Federal Reserve’s 2% target and could influence interest-rate decisions. |
| Core CPI | Core CPI increased 0.3% in August. | Core inflation helps show underlying price pressures while excluding food and energy. |
| PPI / Producer Prices | Producer prices increased 0.4% in August and 5.4% over the past year. | Higher wholesale costs can increase expenses for businesses and eventually affect consumer prices. |
| Jobless Claims | Initial jobless claims fell to 206,000 for the week ending September 5. | Relatively low claims indicate layoffs remain limited. |
| Consumer Sentiment | Preliminary September consumer sentiment fell to 47.8, from 51.7 in August. | Lower confidence may cause households to become more cautious about spending. |
| Inflation Expectations | One-year inflation expectations increased to 4.6%, from 4.0% in August. | Higher expectations can make it harder for inflation to return to the Fed’s 2% target. |
| Treasury Yields | The 10-Year Treasury yield reached 4.974%, while the 30-Year yield was about 5.354%. | Elevated yields can keep borrowing costs higher for businesses and consumers. |
| Stock Market | The Dow fell 1.6%, the S&P 500 fell 0.8%, and the Nasdaq fell 0.7% for the week. | Investors remain cautious about inflation, interest rates, and economic growth. |
| Oil Prices | Brent crude ended near $104.67 per barrel after moving above $100 during the week. | Higher energy prices can increase inflation and business operating costs. |
The CPI and PPI figures come from the latest Labor Department releases, while jobless claims and consumer sentiment were also updated this week.
What Happened This Week
This week’s economic data showed continued inflation pressure. Consumer prices increased 3.4% over the past year, while producer prices rose 5.4%. At the same time, oil prices moved above $100 per barrel, adding another source of pressure for consumers and businesses.
The labor market remains relatively stable, with initial jobless claims falling to 206,000, but consumer sentiment weakened significantly. Investors are now focused on the Federal Reserve’s upcoming meeting, where expectations for a rate increase have strengthened.
Simple Takeaway:
Inflation and energy costs remain elevated, pushing Treasury yields higher and increasing expectations that the Federal Reserve may raise interest rates.
What to Watch Next Week
- Federal Reserve Meeting: The Fed is scheduled to meet September 15–16, with markets closely watching the interest-rate decision.
- Interest Rates: Investors will watch for clues about whether additional rate increases could happen later this year.
- Retail Sales: New consumer spending data will provide a look at household demand.
- Housing Data: Housing starts and existing-home activity will show how higher borrowing costs are affecting the housing market.
- Oil Prices: Energy prices will remain important because they are contributing to inflation pressures.
The Federal Reserve’s September meeting is the major event for markets next week.
Business Financing Takeaway
Businesses continue to face higher financing costs as Treasury yields remain elevated. Higher interest rates can increase the cost of business loans, equipment financing, commercial real estate loans, and credit lines.
For entrepreneurs and small business owners, this environment makes budgeting and understanding borrowing costs especially important. A business may have strong sales and still face pressure if loan payments and operating costs rise.
The bottom line: Higher interest rates make it more important for businesses to understand the full cost of borrowing before taking on new debt.
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