Market Jitters Intensify: Weak Economic Data and Corporate Results Shake Investor Confidence Amid Rising Geopolitical Tensions

This week's economic data has increased investors' concerns about the health of the world's leading economy and whether they will indeed achieve a softer landing. During the week we witnessed a drop in the manufacturing index, a rise in jobless claims to levels not seen in a year and finally a disappointing employment report. At the same time, we note that this was an intense week in terms of corporate results and some well-known companies have reported below estimates or have reported disappointing guidance. Finally, recent increases in geopolitical tensions in the Middle East only add to the uncertainty. As a result, the U.S. equity indices S&P 500 and Nasdaq posted declines of -2.05% and -3.34%, respectively.

On Wednesday, the U.S. Federal Reserve held rates steady at 5.25% - 5.50%. Following the announcement, Fed Chairman Jerome Powell said that second quarter inflation data have increased confidence that inflation is trending towards the target range. At the same time, he added that more positive data will further fuel the institution's confidence to carry out the long-awaited rate cuts.  Powell acknowledged that a rate cut was discussed at this meeting and that the first cut could take place at the next meeting in September. These and other dovish statements fueled expectations that the FOMC will cut rates at its next meeting. However, Powell clarified that a 50 basis point cut is not something the Fed is currently considering.

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