Investing.com - Top 5 things that rocked U.S. markets this week:
1. Powell Sticks to Gradual Hike Script
Federal Reserve Chairman Jerome Powell’s speech on Friday gave Wall Street an even clearer glimpse into how the Fed plans to proceed for the rest of the year.
Powell, speaking at the Fed’s Jackson Hole symposium, commented on balancing moving too fast on rates and hurting the expansion and moving too slow and risking the economy overheating.
And with all said and done, he still likes a gradual pace of rate hikes, which likely means two more this year.
“I see the current path of gradually raising interest rates as the FOMC's approach to taking seriously both of these risks,” he said.
Still, some hoping for the Fed to ease off the hikes, especially next year, were heartened by some dovish remarks on inflation.
“(W)e have seen no clear sign of an acceleration above 2 percent (inflation), and there does not seem to be an elevated risk of overheating,” Powell said. “This is good news, and we believe that this good news results in part from the ongoing normalization process, which has moved the stance of policy gradually closer to the FOMC's rough assessment of neutral as the expansion has continued.”
The Fed chief spoke two days after the minutes of the last FOMC meeting arrived, which also supported the forecast of two more 2018 rate hikes.
"Relative to the forecast prepared for the June meeting, the projection for real GDP growth was revised up a little, primarily in response to stronger incoming data on household spending," the minutes said.
But there was some discussion of how trade was weighing on growth and an escalating trade war could, some argue, give the Fed an excuse to pause in the plan to keep raising rates regularly.
2. Housing Data Still Disappointing
Housing numbers continue to give the market pause. It’s recently been the part of the economy waving the most red flags.
Data on existing home sales released by the National Association of Realtors on Wednesday showed a surprise drop.
Existing home sales fell 0.7% in July from the previous month to an annualized pace of 5.34 million units. Economists had forecast a 0.6% increase to an annualized pace of 5.44 million.
Sales are now 1.5% below a year ago and have fallen on an annual basis for five-straight months, according to NAR.
Next, new home sales fell short, dropping to a nine-month low in July.
New home sales fell 1.7% last month to an adjusted annual rate of 627,000 units. Economists expected a rise to 645,000 units.
3. Oil’s Gains Push Energy Stocks Higher
Oil prices had a strong up week, which in turn boosted energy stocks.
The S&P Energy Sector index rose more than 2% this week, in a much stronger showing than the S&P 500.
Helping sentiment on oil were signs of falling Iranian crude output ahead of U.S. sanctions on the Islamic Republic's crude exports, expected to take effect in November.
Jefferies on Friday, citing third-party reports, said Iranian tanker loadings are already down by around 700,000 barrels a day in the first half of August from the prior month.
Meanwhile, inventories of U.S. crude fell by 5.836 million barrels for the week ended Aug. 17, confounding expectations for a draw of 1.497 million barrels, according to data, released Wednesday, from the Energy Information Administration (EIA).
4. Target Leads Solid Retail Earnings
Among active stocks this week, retail earnings still grabbed plenty of headlines.
Target (NYSE:TGT) stock soared Wednesday as its second-quarter revenue, earnings and same-store sales beat consensus and the company raised its full-year guidance.
The same day, shares of Lowe’s (NYSE:LOW) climbed higher, despite the company’s cautious guidance. Investors focused on its turnaround plan instead.
Lowe's said it will shutter all of its Orchard Supply Hardware stores and also cut inventory in an effort to become a leaner competitor against Home Depot (NYSE:HD).
And on Tuesday, Toll Brothers (NYSE:TOL) bucked the trend for weak housing numbers. The stock jumped as the company reported fiscal third-quarter results that beat on the top and bottom lines.
5. Trump Predicts Market Crash if He’s Ousted
Washington also had its impact on Wall Street this week, as investors digested convictions of two of President Donald Trump’s inner circle.
Former campaign manager Paul Manafort was convicted on eight of 18 counts in his fraud trial, with the jury unable to reach a verdict on the other 10.
And Trump’s former personal lawyer Michael Cohen pleaded guilty to eight charges, saying that he paid off two women for the purpose of influencing an election at the behest of Trump. The White House denied any wrongdoing by Trump.
In an interview with Fox News, Trump said his impeachment would be disastrous for the economy and the stock market.
"I tell you what, if I ever got impeached, I think the market would crash, I think everybody would be very poor," Trump said.