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Wall Street's vigor has waned since the start of August, hurt by a sequence of bank downgrades and expectations of higher-for-longer interest rates. Although one trading day is still left, Wall Street has delivered almost a flat month. The S&P 500 has added 0.3% past month, the Nasdaq is up 0.4%, the Dow Jones has lost 0.9% and the Russell 2000 has slumped about 3% (as of Aug 30, 2023).
Against this backdrop, below we take a look at the key financial developments of the month.
Upbeat Earnings Season
The earnings season came to an end in August and has been more-or-less upbeat. For the 480 S&P 500 companies that have reported Q2 results, total earnings are down 8.5% from the same period last year on 0.8% higher revenues, with 79.4% beating EPS estimates and 65.4% beating revenue estimates, as quoted on the Earnings Trends issued on Aug 23, 2023. The revisions trend has notably stabilized lately, with estimates for several key sectors increasing. WisdomTree U.S. LargeCap ETF (EPS - Free Report) has lost only 1.6% past month.
Hawkish Cues From Fed
Federal Reserve Chair Jerome Powell emphasized the need for continued vigilance in the battle against inflation in a meeting at Jackson Hole, WY on Aug 25. Powell emphasized that even though inflation has moderated slightly from its peak, it is still at an undesirable level. This may lead to further rate hikes or high-for-longer interest rates. Hence, interest rate hedge ETF (PFIX - Free Report) has added 12.4% past month (read: Fed Warns of More Rate Hikes to Tame Inflation: ETFs to Buy).
U.S. Economy Showing Signs of Cooling
The U.S. economy expanded at a 2.1% clip in Q2, compared to the initial estimate of 2.4%, according to official revised estimates released Aug 30. Private-sector payroll results for August registered +177K new jobs for the month. The previous month’s surprisingly high +324K increase has been ratcheted up this morning to +371K. Thus, data for August was less than half the previous month.
U.S. consumer sentiment recorded a larger-than-expected decline in August, primarily due to increasingly negative perceptions of the job market and persistent inflation, which collectively dampened overall optimism.
A Downbeat Month for Banks
Banking stocks had a downbeat August, withSPDR S&P Bank ETF (KBE - Free Report) losing 7.9% past month (as of Aug 29, 2023). Invesco KBW Regional Banking ETF (KBWR) lost even higher at 9.1% past month. Due to the banking stocks’ slump, inverse-leveraged bank ETN MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN (BNKD - Free Report) jumped as much as 31.3% past month. Several bank downgrades led to this slump.
Landmark Legal Victory for Bitcoin
One of the most significant developments in 2023 for the Bitcoin ecosystem was the legal victory in the U.S. Court of Appeals for the D.C. Circuit, involving Grayscale and the U.S. Securities and Exchange Commission (SEC) on Aug 29.
The court sided with Grayscale in its lawsuit against the SEC's denial of the company's application to convert the Grayscale Bitcoin Trust into an ETF. This decision is not only a win for Grayscale but also sets an example that could impact other companies seeking to launch Bitcoin ETFs, including industry giants like BlackRock and Fidelity.
China Stocks Take a Dive on Real Estate Woes
China stocks have been under pressure from the economic slowdown, a slump in the manufacturing sector and most importantly, chaos in the real estate market. Despite a series of measures implemented to stabilize the markets, the selloff in Chinese stocks has persisted mainly due to the real estate crisis. While default fears of bond payments by developer Country Garden are mounting, China’s property giant Evergrande has filed for U.S. bankruptcy protection. iShares China Large-Cap ETF (FXI - Free Report) lost about 7% in the past month, while China real estate ETF hasslumped 10.5%.
Uranium Prices Hitting a High
Interest in nuclear power is on the rise, with uranium prices hitting their highest in over a year. Growing energy concerns and the increasing need for dependable and eco-friendly energy sources are fueling the surge in uranium ETF. The ability of nuclear power to cut carbon emissions has brought it back into the public eye. No wonder, Sprott Junior Uranium Miners ETF (URNJ - Free Report) added 15.8% past month (read: Uranium Miners ETFs Top in August).
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Top ETF Stories of August
Wall Street's vigor has waned since the start of August, hurt by a sequence of bank downgrades and expectations of higher-for-longer interest rates. Although one trading day is still left, Wall Street has delivered almost a flat month. The S&P 500 has added 0.3% past month, the Nasdaq is up 0.4%, the Dow Jones has lost 0.9% and the Russell 2000 has slumped about 3% (as of Aug 30, 2023).
Against this backdrop, below we take a look at the key financial developments of the month.
Upbeat Earnings Season
The earnings season came to an end in August and has been more-or-less upbeat. For the 480 S&P 500 companies that have reported Q2 results, total earnings are down 8.5% from the same period last year on 0.8% higher revenues, with 79.4% beating EPS estimates and 65.4% beating revenue estimates, as quoted on the Earnings Trends issued on Aug 23, 2023. The revisions trend has notably stabilized lately, with estimates for several key sectors increasing. WisdomTree U.S. LargeCap ETF (EPS - Free Report) has lost only 1.6% past month.
Hawkish Cues From Fed
Federal Reserve Chair Jerome Powell emphasized the need for continued vigilance in the battle against inflation in a meeting at Jackson Hole, WY on Aug 25. Powell emphasized that even though inflation has moderated slightly from its peak, it is still at an undesirable level. This may lead to further rate hikes or high-for-longer interest rates. Hence, interest rate hedge ETF (PFIX - Free Report) has added 12.4% past month (read: Fed Warns of More Rate Hikes to Tame Inflation: ETFs to Buy).
U.S. Economy Showing Signs of Cooling
The U.S. economy expanded at a 2.1% clip in Q2, compared to the initial estimate of 2.4%, according to official revised estimates released Aug 30. Private-sector payroll results for August registered +177K new jobs for the month. The previous month’s surprisingly high +324K increase has been ratcheted up this morning to +371K. Thus, data for August was less than half the previous month.
U.S. consumer sentiment recorded a larger-than-expected decline in August, primarily due to increasingly negative perceptions of the job market and persistent inflation, which collectively dampened overall optimism.
A Downbeat Month for Banks
Banking stocks had a downbeat August, withSPDR S&P Bank ETF (KBE - Free Report) losing 7.9% past month (as of Aug 29, 2023). Invesco KBW Regional Banking ETF (KBWR) lost even higher at 9.1% past month. Due to the banking stocks’ slump, inverse-leveraged bank ETN MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN (BNKD - Free Report) jumped as much as 31.3% past month. Several bank downgrades led to this slump.
Landmark Legal Victory for Bitcoin
One of the most significant developments in 2023 for the Bitcoin ecosystem was the legal victory in the U.S. Court of Appeals for the D.C. Circuit, involving Grayscale and the U.S. Securities and Exchange Commission (SEC) on Aug 29.
The court sided with Grayscale in its lawsuit against the SEC's denial of the company's application to convert the Grayscale Bitcoin Trust into an ETF. This decision is not only a win for Grayscale but also sets an example that could impact other companies seeking to launch Bitcoin ETFs, including industry giants like BlackRock and Fidelity.
China Stocks Take a Dive on Real Estate Woes
China stocks have been under pressure from the economic slowdown, a slump in the manufacturing sector and most importantly, chaos in the real estate market. Despite a series of measures implemented to stabilize the markets, the selloff in Chinese stocks has persisted mainly due to the real estate crisis. While default fears of bond payments by developer Country Garden are mounting, China’s property giant Evergrande has filed for U.S. bankruptcy protection. iShares China Large-Cap ETF (FXI - Free Report) lost about 7% in the past month, while China real estate ETF hasslumped 10.5%.
Uranium Prices Hitting a High
Interest in nuclear power is on the rise, with uranium prices hitting their highest in over a year. Growing energy concerns and the increasing need for dependable and eco-friendly energy sources are fueling the surge in uranium ETF. The ability of nuclear power to cut carbon emissions has brought it back into the public eye. No wonder, Sprott Junior Uranium Miners ETF (URNJ - Free Report) added 15.8% past month (read: Uranium Miners ETFs Top in August).