U.S. equities closed lower Friday, but preserved gains for the week, as oil prices dropped and investors worried about upcoming central bank policy meetings. Oil prices fell on the combination of a stronger US dollar and an expected increase in oil exports from Nigeria and Libya. A stronger greenback generally pressures oil prices, as this commodity is generally priced in US dollars. The Federal Reserve and the Bank of Japan (BOJ) are both scheduled to finish their policy meetings this Wednesday. Most expect the BOJ to slightly ease monetary policy and the Fed to keep rates unchanged. The markets will carefully watch for any deviations from these expectations and any ensuing comments. Additionally, Friday was a so-called quadruple witching day, where investors witnessed the simultaneous expiration of stock-index futures, stock-index options, stock options and single-stock futures. This helped to contribute to market volatility. The S&P 500 retreated 0.49% on Friday, while the Dow Jones Industrial Average and NASDAQ Composite lost 0.38 % and 0.10%, respectively.
For the week, the S&P 500 gained +0.59%, the Dow Industrials rose +0.25% and the and the MSCI EAFE (developed international) decreased by -2.48%.
What We’re Reading
U.S. Inflation Increasing on Higher Healthcare and Housing Costs -- Reuters
China’s Inventories of U.S. Treasuries -- Bloomberg
Long-Term Charting for U.S. Markets -- Market Watch
Chart of the Week: Consumer Confidence Unchanged
Andrew Hunter, U.S. Economist for Capital Economics, shows that the University of Michigan measure of consumer confidence was unchanged at a five-month low of 89.8 in September, although it is still at a level that, historically, has been consistent with real consumption growth of around 4%. Overall, the recent weakness of retail sales suggests that third-quarter real consumption growth could fall to between 2.5% and 3% annualized, which is a little weaker than Hunter had previously thought. But with consumer confidence holding steady at a high level and labor market conditions continuing to gradually improve, this is unlikely to be the start of a sustained slowdown.
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