Stock market today: Wall Street’s dismal August drags on with 3rd straight losing week

Wall Street endured its third consecutive week of losses, closing out a challenging August marked by market declines. The S&P 500, along with other U.S. indices, closed the week with a drop of over 2%. The S&P 500 barely moved, concluding at 4,369.71 with a decrease of 0.65 points, or less than 0.1%.

The Dow Jones Industrial Average managed to add 25.83 points, equivalent to 0.1%, finishing at 34,500.66. On the other hand, the Nasdaq composite experienced a decline of 26.16 points, or 0.2%, settling at 13,290.78.

August proved to be a turbulent month for the stock market, erasing more than 25% of the S&P 500's gains from the strong performance in the first seven months of the year. This trend is partly attributed to rising yields prompting investors to reassess the valuation of stocks, especially after concerns were raised about the market's rapid surge.

Market stability improved slightly on Friday as yields showed a slight retreat. After recently surpassing 4.30%, the 10-year Treasury yield retreated to 4.24% from its near-2007 high.

Global stock markets faced greater downturns due to higher yields worldwide. While higher yields offer increased interest payouts for bonds, they also reduce investor willingness to pay high prices for stocks and other relatively less stable investments.

The stock market's narrative appears to be shifting from a "buy the dip" mentality in the first half of the year, where moments of weakness were seen as buying opportunities, to a "sell the rip" sentiment in the second half. Bank of America's investment strategist, Michael Hartnett, indicated this shift, pointing to Microsoft and other tech-oriented stocks as indicators of this trend.

The so-called "Magnificent Seven," a group of major tech stocks that drove a significant portion of the S&P 500's gains earlier in the year, has faced pressure due to the negative impact of higher rates. Some of these stocks have declined over 10% from their previous highs this year. Microsoft, Alphabet, and Tesla experienced respective declines of 0.1%, 1.9%, and 1.7% on Friday.

The rise in yields can be attributed in part to resilient data indicating the strength of the U.S. economy, potentially avoiding the long-anticipated recession. However, this also raises expectations for the Federal Reserve to maintain higher interest rates, which has implications for both the economy and investments.

While traders previously anticipated rate cuts, the recent economic data has led to a reduction in expectations for rate cuts through 2024. The upcoming speech by Fed Chair Jerome Powell at the Jackson Hole event is anticipated as a significant market event.

The concern about China's economic recovery also impacted global markets, with stock declines observed in Europe and Asia. China's economic progress following the easing of COVID-19 restrictions has faced obstacles, particularly in its property development sector. Evergrande Group, a major real estate developer, sought approval for a restructuring plan to avoid defaulting on a significant debt load.

The Hang Seng index in Hong Kong experienced a decline of 2.1% and has already lost 10.6% in August alone.