Weekly Market Review & Analysis For August 1, 2022

The market at the beginning of August had another successful trading week. It wasn't a simple task, but market participants kept the same positive outlook as in July.

Things began on a slow note. There were some theories that the market could face selling pressure following the massive move made in July. This was true during the beginning of the week but not so much in the latter portion of this week. Fittingly, the market got over the selling plateau the day before Wednesday (hump day), which proved to be the most significant factor in a successful week.

A lack of adequate response triggered a wide-based market rally Wednesday, which saw decisive leadership from the mega-cap stocks and another substantial decrease in oil prices when OPEC+ said it planned to increase production in September at 100,000 barrels per day. This is in contrast to July and August, which increased the production limit to 600,000 barrels daily.

WTI crude oil market prices fell to just below $90.00 per barrel last week, closing Friday with $88.53 per barrel. This was a considerable decrease for the energy sector, which was the most underperforming sector, suffering a 6.8 percent decrease (including the 2.0 percent increase during the Friday session). The most successful sectors comprised information technology with a +2.0 percent increase. Consumer discretionary and communications services posted a +1.2 percent each.

The mega-cap stock market has been a significant source of support for the index for most of the trading week. This was evident in the vanguard Mega-Cap Growth ETF (MGK) position. It was up 1.8 percent during the week, while there was a modest 0.4 percent increase on the S&P 500 and a less modest 0.1 percent increase in the Invesco S&P 500 Equal Weight ETF (RSP).

This performance made a huge difference in the continuing execution of the indexes for growth and the relative increase in the performance of many smaller-sized companies. Its Russell 3000 Growth Index jumped 1.6 percent this week, compared to the 0.2 percent decrease in The Russell 3000 Value Index.

The week's market session didn't go without its speculative side either. There were critical short squeezes that affected several stocks. AMTD Digital (HKD), which debuted in July at $13, reached $2555.30 on the 2nd of August with no significant news announcement. The price action of the stock turned into the headlines.

In the meantime, there was plenty of earnings-related news this week. The companies that announced their results did not have the luster of the reporters from last week's report. However, they did carry the image of offering better-than-expected results, which was adequate to keep customers intrigued in the market.

As the week advanced, the earning reports took a backseat behind the employment report for July. There was a bit of scepticism before the announcement due to how it might impact the market's view of the direction of the Fed policy.

It appears that the U.S. Treasury market took this view to heart. The yield on the Two-year note was at 2.80 percent at the beginning of the week and was 3.05%, just ahead of the data, and closed the session on Friday with 3.23 percent (up 33 basis points). The yield on the Ten-year note climbed to 2.53 percent at the beginning of the week and was 2.70 percent before the report, closing the session on Friday at 2.84 percent (up by 20 basis points).

The market was initially shaken by the report and the change in market rates; however, it eventually found its footing and came up with a significant rebound. Friday's session didn't result in gains for all major indices. However, overall performance was much higher than many had expected due to the changing expectations for rate hikes.

Before the release of employment numbers, the Fed funds futures market was giving a 34% rate hike of 75 basis points probability during the September FOMC meeting. Following the report, the possibility jumped to 68.5 percent, according to CME's FedWatch Tool.