Most major stock market indexes turned on a dime downward on the first day of July. The bullish rally throughout June faded into oblivion.

Investors couldn't wait to sell the stocks they had bought with a passion throughout June.

One of the catalysts was that the Federal Reserve (Fed) raised interest rates at it regular scheduled meeting on June 30th. 

Ironically, most investors and financial pundits had predicted that the Fed would in fact raise short-term interest rates by 1/4% at this meeting. This was the first time since early 2001 that the Fed raised short-term interest rates.

There was even a rally on that day, with most major stock market indexes finishing the day in positive territory. The bulls were emboldened that the Fed was sticking to its rhetoric, that it would be raising interest rates in a "measured

way", and would continue to be patient ahead as long as inflationary pressures remained subdued.

The bears however, regained the upper hand in the stock market  throughout July as most major stock market indexes remained in a free-fall throughout July.

Bond market investors did much better throughout July.  Most bond types and maturity remained in a tight range throughout July.

The Iraq war continued to remain a quagmire during July as daily the fatalities and bombings continued.

One of the biggest forces fueling the stock market bears in July was the continuing rise of crude oil prices to near historic levels.

Rising fuel oil prices certainly could ignite an inflationary storm in the U.S. economy.
August started out the same way that July ended, that was

down for most major stock market indexes.

Adding fuel for the bears in August was the employment report released on August 6th.

Most economic pundits had predicted that more than 150,000 new non-farms jobs would be created for the U.S. economy in July. However, the number of new non-farm jobs was only 73,000, an incredible miss for the pundits.

The bulls did however regain their  courage right after the Fed met on August 10th at their regular scheduled meeting. The Fed raised short-term interest rates 1/4% at this meeting.

Most Wall Street prognosticators had expected the Fed to raise short-term interest rates by 1/4%. The Fed in its statement to the public again reiterated its inclination to continue to raise interest rates ahead in a "measured way".