US stock indices closed higher on Friday, August 21, but fell for the week due to concerns over changing bond yields and geopolitical tensions in the Middle East. The S&P 500 and Nasdaq ended a three-week winning streak. The Dow recorded its second consecutive weekly loss. Investors have been closely watching US government bond yields, which affect risk appetite by signaling possible higher borrowing costs.
Key Details
The S&P 500 rose by 0.7% on Friday. The tech-heavy Nasdaq gained 1.1%. These gains followed the US Treasury's announcement to double its bond buybacks, easing fears about rising yields. Scott Bessent, US Treasury Secretary, indicated that more Treasury repurchases could be coming. Economic data released on Friday showed strong growth in the US services sector. This contributed to a sharp increase in overall business activity in August, despite a slowdown in manufacturing.
Background
European stocks also advanced on the same day. The pan-European Stoxx 600 climbed 0.6% to close at 654.18 points. However, the index still ended the week lower due to ongoing inflation concerns from high oil prices and Treasury yields. Despite these challenges, a strong earnings season has supported investor confidence in Europe. The Eurozone business activity grew at its fastest pace this year, driven by new orders and renewed export growth, according to S&P Global’s Flash Eurozone Composite PMI Output Index.
The changes in bond yields and rising oil prices are likely to pressure equity markets. This is especially true for sectors sensitive to inflation, such as consumer goods and energy. Investors will look for more economic data releases that could affect the outlook for inflation and interest rates.
Watch for upcoming economic reports, including the next inflation data release scheduled for next week.
Based on reporting by: businesstimes.com.sg