Stocks Dip After Two Months of Gains

​Major stock indices fell in August for the first time since May, in which indices lost in excess of 6%. In August, the S&P 500 declined 1.8%, falling to 2,926.46, while the Dow Jones Industrial Average (DJIA), Nasdaq, and Russell 2000 each declined 1.7%, 2.6%, and 5.1%, respectively. The month was characterized by excess volatility, as each index counted 10 or more days of 1%-or-greater swings. 

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Two primary factors affecting stock market performance in August were the US-China trade war and a recession warning from the bond market. Notable days of the month included:

• Stocks suffered their worst day of the year on August 5th, as China allowed the Yuan to fall to its lowest level, relative to the Dollar, in more than 10 years, and China also announced it would stop importing US agricultural goods. On that day, the DJIA fell as much as 960 points before closing the day down 767 points, or 3.47%.
• Stocks fell sharply again on August 14th, as the yield on 10-year Treasuries fell below the yield on 2-year Treasuries, inverting for the first time since June 2007. An inverted yield curve, particularly at the 10- and 2-year intervals, has historically preceded a recession.
• After President Trump tweeted that US companies should pull out of China, markets fell again on August 24th.

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IPOs Still on Pace for Record Year despite Slow August

U.S. IPO activity continued its downward trend in August, falling to $1.7 billion in capital raised, representing a 69% decline from July levels, and is down 89% from May’s peak of $16 billion. The largest IPO during the month was a $569.8-million IPO from Dynatrace, a Massachusetts-based company that develops software intelligence for the enterprise cloud.

A number of factors are suppressing filings for new issuances, namely a lack of Chinese filers due to the ongoing trade dispute, uncertainty about the U.S. economy in the near-term and general market volatility.
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This year is shaping up to be one of the largest years for IPOs on record, on pace to threaten 2014’s record year. However, a slowdown in the global economy and trade uncertainty could place a cap IPOs for the last four months. That said, in August two more major companies revealed publicly their filings to go public, WeWork and Peloton, which could help boost 2019 totals.