On the last trading day of August, the Dow and the broader stock market logged their second-worst month of this year. Stocks finished mixed Friday, giving up gains after opening higher.
The Dow closed up 41 points, or 0.2% higher. For the month, the index is down 1.7%. The S&P 500 and the Nasdaq Composite are down 0.1% and 0.5%, respectively.
Still, the Dow and the S&P are on track to log their best weekly gains since early June, and it is shaping up to be the best week in 10 for the Nasdaq.
Optimism that trade tensions between the United States and China might ease also helped the market move higher this week.
The key for the market will be if the gains can last through September.
Stocks logged their second worst month of this year — only May was worse. The Dow slipped 1.7%, while the S&P was down 1.8%. The Nasdaq shed 2.6%, according to Refinitiv.
May and August have been the only negative months for stocks in 2019.
August is typically considered a quiet month for the market, but this hasn’t held true of late.
Trade tariffs, retaliation, harsh rhetoric and recession warnings flashing from the bond market were issues that dominated the market this month.
President Donald Trump threatened an additional 10% of tariffs on $300 billion of Chinese imports on the first trading day in August, which led the Dow to its biggest intraday swing of the year. These tariffs will also hit consumer items like toys and iPhones, a concern given that the slowing US economy is being kept alive by strong consumer spending.
As trade tensions escalated, so did worries about a currency war, particularly after the Chinese government devalued its yuan to fall below the 7-to-1 ratio against the US dollar for the first time in a decade.
On the back of this, August 14 became the worst day of the year for stocks, with the Dow plummeting 800 points.
Investor worries helped safe haven assets like gold and Treasuries higher.
Gold prices rallied to a six-year high. The 30-year US Treasury yield dropped to its lowest level on record this month, while the 10-year yield fell to a three-year low. Yields and prices move opposite to one another.
The US yield curve inverted on multiple occasions in August, flashing a recession warning sign. Yield curve inversions have often preceded recessions in the past and are a sign that investors are nervous about the immediate future of the economy.
Meanwhile, Trump’s criticism of Federal Reserve Chairman Jerome Powell continued throughout the month. At one point, the president tweeted “my only question is, who is our bigger enemy, Jay Powell or Chairman Xi,” referring to Chinese President Xi Jinping.
On Friday, Trump once again lashed out at Powell, tweeting “The Euro is dropping against the Dollar ‘like crazy,’ giving them a big export and manufacturing advantage…and the Fed does NOTHING!” The United States has a Fed problem, not a tariff problem, Trump continued.
The euro traded down 0.6% against the US dollar Friday. For the year, the shared eurozone currency is down 4.2% against the greenback, according to Refinitiv.
Powell stuck to his guns at the Fed’s annual Jackson Hole meeting on August 23, acknowledging the risk of an economic slowdown in the Untied States without hinting whether the central bank would cut interest rates again in September.
Expectations for a quarter percentage point cut at the September 18 meeting is roughly 96%, according to the CME’s FedWatch tool.