The Dow Jones Industrial Average fell 1.7% last week to a three-month low after the Federal Reserve raised interest rates with hawkish guidance on Wednesday. Dow futures, along with S&P 500 and Nasdaq-100 contracts, opened slightly lower for Sunday evening trading. Developments over the weekend raised speculation of further escalation in the Middle East, while U.S.-China trade talks continued ahead of a planned Trump-Xi meeting.
Dow drops to three-month low
The Dow Jones Industrial Average lost 1.7% last week, sliding to a three-month low alongside the small-cap Russell 2000. The Russell 2000 shed 1.5% over the same span. The Nasdaq moved the other way, rising 0.7%, while the S&P 500 dipped 0.1%, both finishing above their 50-day moving averages.
Dow Jones futures, together with S&P 500 and Nasdaq-100 contracts, opened at 6 p.m. ET Sunday and were indicated slightly lower ahead of the new trading week. Overnight futures moves don't necessarily carry into the next regular session.
Rate hike and AI slowdown calls hit stocks
Stocks slumped midweek after the Federal Reserve raised interest rates and issued hawkish guidance on Wednesday. That followed a Monday sell-off in AI stocks after some big AI leaders called for a development slowdown, though software shares surged as a result. The market rebounded broadly Thursday before finishing narrowly mixed Friday as the 10-year Treasury yield moved back toward 19-year highs.
By week's end, the 10-year yield had risen two basis points to 4.995%. The two-year yield, closely tied to the Fed outlook, jumped 10 basis points to 4.74%. The 30-year yield fell three basis points to 5.33%.
Middle East tensions and China trade talks
President Donald Trump cut short a Camp David visit on Saturday to return to the White House. The State Department issued security alerts for the Middle East citing Houthi attacks on Saudi Arabia's capital, raising speculation of further escalation. Meanwhile, Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng held trade talks in New York on Sunday on trade and AI, ahead of the Sept. 24 meeting between Trump and Chinese President Xi Jinping.
Earnings and economic data will be light this coming week, but the Mideast conflict and Trump's meeting with Xi remain front and center for traders.
Source: Investor's Business Daily
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