Federal Reserve Chair Jerome Powell announced that the Fed may cut interest rates in September due to progress in reducing inflation and a cooling job market. 

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The current rate remains at 5.3%. Powell emphasized that while inflation continues to fall, a rate cut could be considered if this trend persists. Markets, however, currently expect a .5% September rate cut. 

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The potential reduction aims to lower borrowing costs and support economic growth, despite the US GDP exceeding expectations at 2.8% last week. However, the US unemployment rate spiked to 4.3% last week as the job market slowdown steepens further. 

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In July 2024, the US economy added 114K jobs, the lowest in three months, below the 12-month average of 215K. Gains were seen in health care, construction, and government, while the information sector saw job losses.

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Although markets initially surged after the rate decision, with shares of Invesco QQQ (the market-cap-weighted Nasdaq) bouncing nearly +3% on Fed day after being down nearly 10% from its one-month high, they have since slipped over -5.5%. 

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This was largely due to a report of slowing manufacturing data as well as disappointing earnings reports by Microsoft, Amazon, Intel, and Booking.com. In our view, MSFT and AMZN delivered amazing reports and Amazon itself is now on sale. But investors were looking for a reason to break up with them.

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The mass purchasing of 10-year Treasury bills last week drove the yields down by .4 percent, the biggest purchase since the end of 2018. The last time the move was this big was 2008, indicating the bond investors are bracing for a recession. On the other hand, they have been waiting nearly two years to make this switch and it finally became clear it was time to lock in yields.

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On Thursday, the SPY fell over 2.5% after the rebound and continued to decline, ending the week down another 2.5%. The VIX - the market's fear gauge - rocketed over 50% as well.

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The Nasdaq 100 Index (QQQ) entered correction territory, down -10% from peak - losing over $2 trillion in value as traders withdrew from Big Tech. Notable declines include Nvidia and Tesla, down over 20% from recent highs. Despite these losses, tech stocks remain higher for the year.

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