The S&P 500 Index, as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), declined for the third consecutive week, while the Nasdaq 100 tumbled into a market correction phase, suffering a 10% drawdown from its all-time highs hit last month.

Statements from Fed Chair Jerome Powell hinting at a potential rate cut in September provided only temporary support to the stock market, as weaker-than-expected economic data and escalating geopolitical tension in the Middle East dampened investor risk appetite by week’s end.

As a result, investors turned to safe-haven assets, with long-term Treasury bonds enjoying their best week in years as yields fell sharply amid increased expectations of Fed rate cuts. Speculators are now betting on a larger 50-basis-point reduction in September.

The U.S. economy showed signs of weakness last month, as manufacturing activity contracted at its fastest rate since December 2023 and job growth slowed significantly. Alarmingly, the unemployment rate unexpectedly rose to 4.3%, the highest level since October 2021.

Utilities were the strongest sector for the week, while technology the worst. Regional banks and semiconductors suffered the heaviest losses among industries.

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Fed Policy Mistake?

The Federal Reserve’s decision to keep interest rates unchanged was criticized by some economists as a serious policy error, especially following the July jobs report released Friday that showed rising unemployment.

Economists argue the Fed should had already lowered rates this week to support the economy as labor market data turns negative.

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