The markets endured their worst week in more than a year last week. Can they bounce back this week?
September is historically the worst month of year for stocks, one of just two months to average a negative return since 1945. Last week was the first week of September and, true to form, it was not a good one; in fact, it was the worst week so far of 2024.
The Nasdaq Composite was the hardest hit, dropping 5.8% last week to close Friday back under 17,000 at 16,691. It was the worst week for the Nasdaq since January of 2022.
The Russell 2000 also dropped sharply, falling 5.7% to 2,091. Meanwhile, the S&P 500 sank 4.2% to end the week at 5,408 while the Dow Jones Industrial Average tumbled 2.9% to 40,345. It was the worst week for the two large cap indexes since March of 2023.
Markets were trending higher in early trading on Monday, as investors saw buying opportunities from last week’s rubble. With a big economic report on inflation coming out Wednesday, will the markets see a bounce back week?
NVIDIA, semiconductors continue slide
The Nasdaq had its worst week in more than two years, and it was mainly due to a significant drop by leading semiconductor stocks.
NVIDIA (NASDAQ:NVDA) stock got hammered, falling 12.7% last week alone. One of the reasons it fell so sharply was the news, initially reported by Bloomberg, that NVIDIA had been subpoenaed by the U.S. Department of Justice over potential antitrust law violations. This is part of an ongoing investigation that was first reported back in the spring.
It is the latest hit for NVIDIA, which is down some 21% in the past couple of weeks. The previous week, NVIDIA stock fell after record revenue and beating earnings estimates. Yet, the stock fell because its outlook did not exceed estimates by enough.
Semiconductor stock Broadcom (NASDAQ:AVGO) also fell about 12.7% last week, and it was a similar story. Broadcom’s earnings and revenue showed big gains and beat estimates, yet the stock fell on its outlook that was slightly below estimates.
The markets also reacted negatively to the unemployment report on Friday. Some 142,000 jobs were created in August, dropping the unemployment rate to 4.2%. But the numbers were below the 161,000 new jobs that were expected. Also, the July new jobs total was adjusted down to just 89,000, from 114,000. This sparked fears of a recession, which contributed to last week’s selloff.
Along with NVIDIA and Broadcom, other semiconductor stocks fell last week, including Micron Technology (NASDAQ:MU), down 9.6%, ON Semiconductor (NASDAQ:ON), down 11%, AMD (NASDAQ:AMD), down 7.7%, and Intel (NASDAQ:INTC), down 6.2%.
Deja vu all over again?
If you watch the markets long enough, you see the patterns and there is one emerging here. August went by the same playbook, as the markets overreacted to a weaker than anticipated July jobs report, then surged higher on a better-than-expected inflation report, wiping out all of the losses.
So here we are again, with the Consumer Price Index (CPI) for August due to come out on Wednesday. It is forecasted to fall to 2.6%, from 2.9% in July. If that is the actual number, look for the markets to surge this week. Even if it falls short of expectations, but is at or below the July rate, the markets should react favorably.
The markets were already starting to bounce back on Monday, as the Nasdaq was up nearly 200 points (1.2%) at the open and the S&P 500 climbed about 50 points (1%). Investors are taking advantage of lower valuations for some of the hardest hit stocks, like NVIDIA, which jumped 3.4% in early trading Monday.
The catalysts are indeed there for a bounce back week for the markets.
