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Navigating U.S. Stock Volatility Amid Economic Data And Inflation Worries 


U.S. Stocks closed higher on Friday, September 8th, 2023, after some late buying into the close. 

In another volatile session that swung from negative to positive twice during the day, investors grapple with the state of economy in the light of potential actions by the Federal Reserve. 

The U.S. services sector outperformed expectations in August, while the jobless claims came in lower than expected. 
Initial unemployment claims decreased by 13,000 to 216,000 in the week ending September 2nd, according to Labor Department data released on Thursday. 

Additionally, there were new cuts in oil production and data confirming a slowdown in China and Eurozone. 

When considering the data and events from last week, it appears that inflation may still pose a problem.  

For the week, the Dow was down 0.8%, closing at 34,577, the S&P 500 was down 1.3%, closing at 4,457, and the Nasdaq Composite fell 1.9%, closing at 13,761. 

Here are the closing levels on Friday, September 8th, 2023: 

 Last Change %Change 
DOW JONES 34576.59 +75.86 +0.22% 
S&P 500 4457.49 +6.35 +0.14% 
NASDAQ 13761.53 +12.70 +0.09% 
U.S. 10Y 4.264%   
VIX 13.84 -0.56 -3.89% 

It was another volatile week, albeit shorter due to the Labour Day holiday on Monday. 

The bias last week was to drift lower, following the strong performance from the week before. 

The lack of follow-through buying suggests that the market may not be convinced that the Fed is finished with rate cuts for now and that further cuts may be on the horizon. 

Strong inflationary data has raised doubts in the minds of investors, and there is a risk that inflation may become a concern in the last quarter of the year. 

While the dip buyers, FOMO (Fear of Missing Out), and the AI frenzy are still present, the recent trading pattern suggests that these strong buying pressures may not be as prominent as in recent times. 

Once again, we have broken below the 50-day moving average, and this could indicate that we are entering a phase of range trading around this technical level, making it difficult to predict the future direction. 

However, the failure to sustain above the 50-day moving average, after convincingly breaking through it last week, could be a sign of more weakness to ahead.  

For now, it is advisable to be prepared for continued volatility as the most prudent assumption. 

Source: CBOE, Bloomberg 

This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable U.S. bank exceeding 20 years. 

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