Stocks Weaken Second Week
September 23 - 27, 2019 Recap
• Trade Fears Sap Sentiment. U.S. stocks declined Friday to end at a three-week low on unconfirmed reports the Trump administration is considering restrictions on American investments into Chinese securities and possibly delist Chinese companies from U.S. stock exchanges. If true, it would signal a significant escalation in global trade tensions. U.S. and Chinese negotiators are set to meet next month in Washington, D.C. for their 13th round of trade talks. Outside of Friday’s eruption, both sides announced conciliatory actions this month to help ease tensions.
• Weekly Performance. For the week, the Dow Industrials slipped 0.43%, the S&P 500 declined 0.98% and the tech-heavy Nasdaq Composite lost 2.18%. The S&P 500 widened its gap below its July 26 record high to 1.73% (including dividends), but finished the week above its 50-day moving average.
• Inflation Remains Muted. TThe Federal Reserve’s favorite inflation measure, the personal consumption expenditures index (PCE) was up only modestly last month, rising by just 1.4% from a year ago. That is well below the Fed’s target of 2%.
• Consumer Staples Perform Best. Eight of the 11 major sectors ended lower last week, with Healthcare (-2.98%), Energy (-2.60%) and Communication Services (-2.34%) falling the most. Financials (-0.17%) fell the least, while Consumer Staples (+1.33%), Utilities (+1.33%) and Real Estate (+0.34%) outperformed.
• Treasurys Prices Ratchet Higher. Treasury prices climbed higher last week amid renewed trade concerns, sending yields broadly lower. The yield on two-year notes fell six basis points last week to 1.63% and 10-year yields declined four basis points to end the week at 1.68%. Also for the week the U.S. Dollar Index strengthened by 0.6% while U.S. WTI crude oil fell 3.75% to end at a two-week low of $55.91/barrel.
What We’re Reading
Trade Deal Still #1 Issue
China Doubles Troops in HK
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Week’s Economic Calendar
Monday, September 30: Chicago-Area Business Conditions;
Tuesday, October 1: ISM Manufacturing Index, Construction Spending;
Wednesday, October 2: ADP Private-Sector Employment;
Thursday, October 3: Weekly Jobless Claims, ISM Non-Manufacturing index, Factory Orders;
Friday, October 4: Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings.
Is the housing market making a comeback? Housing activity has picked up in recent months. New home sales increased in August to 713,000 (seasonally adjusted annualized rate), more than 18% higher than one -year ago. There has also been an increase in existing home sales and housing starts climbed to a 12-year high last month. Falling mortgage rates have helped propel housing activity higher after a slump last year.
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