Monthly Archives: August 2017

Market Insights 8/31/2017

Markets Remain Determined to Grind Higher

U.S. equities continued their advance despite a jump in gasoline prices amid the impact of Hurricane Harvey, as well as a mixed bag of economic news and continued anxiety surrounding political and global monetary policy uncertainty.

Treasury yields were little changed and the U.S. dollar was modestly lower, while crude oil prices and gold were solidly higher.

The Markets…

The Dow Jones Industrial Average (DJIA) advanced 60 points (0.3%) to 21,952,

The S&P 500 Index gained 14 points (0.6%) to 2,472. The S&P 500 ended August higher by .09% despite suffering 1.54 and 1.45% decline on August 17th and August 10th respectively. In August the S&P 500 had 9 trading days lower and 14 higher in the 23 trading that constituted the month.

The Nasdaq Composite rallied 60 points (1.0%) to 6,429. Ever the resilient index the NASDAQ added 1.27% on to its total despite a 2.13% decline on August 10th and a 1.93% decline on August 17th. Of the 23 trading days in August, 12 were lower and 11 ended higher.

In moderately heavy volume, 905 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil rose $1.27 to $47.23 per barrel and wholesale gasoline jumped $0.14 to $1.78 per gallon

The Bloomberg gold spot price was $14.36 higher at $1,322.96 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.2% to 92.69

Personal income and spending data mixed

Personal income was 0.4% higher month-over-month in July, above the Bloomberg forecast of a 0.3% gain, and compared to June’s unrevised flat reading. Personal spending rose 0.3% last month, below expectations of a 0.4% gain, and versus June’s upwardly revised 0.2% gain. The July savings rate as a percentage of disposable income was 3.5%.

Weekly initial jobless claims rose by 1,000 to 236,000 last week, below forecasts of 238,000, with the prior week’s figure revised higher by 1,000 to 235,000. The four-week moving average declined by 1,250 to 236,750, while continuing claims fell 12,000 to 1,942,000, south of estimates of 1,951,000.

Pending home sales declined 0.8% m/m in July, versus projections of a 0.3% increase, and following June’s downwardly revised 1.3% gain. Compared to last year, sales were 0.5% lower. Pending home sales are used as a gauge of the pipeline of existing home sales, which unexpectedly fell in July.

Treasuries were little changed, as the yields on the 2-year and 10-year notes, along with the 30-year bond, were flat at 1.33%, 2.13% and 2.73%, respectively. Bond yields have been quiet though the U.S. Dollar Index has rebounded from recent pressure on eased concerns toward flared-up tensions toward North Korea, lingering global monetary policy and U.S. political uncertainties, and the impact of Hurricane Harvey.

Tomorrow, the domestic economic calendar will end the week with a bang, courtesy of a variety of August reports, such as the ISM Manufacturing Index, Markit’s Manufacturing PMI Index, the final University of Michigan Consumer Sentiment Index, and auto sales. Manufacturing activity is expected to continue to depict growth and consumer sentiment is projected to remain near January’s thirteen-year high.

However, the headlining report will likely be the release of the August non-farm payroll report, projected to show jobs grew by 180,000 after July’s 209,000 gain, and employment in the private sector is expected to increase by 170,000 jobs after the prior month’s 205,000 advance. The unemployment rate is expected to remain at 4.3%, while average hourly earnings are estimated to rise 0.2% m/m after growing 0.3% in July. Compared to the last year, earnings are predicted to be up 2.6%, after July’s 2.5% gain. Construction spending for July is also on tap for tomorrow.

Yesterday’s stronger-than-expected Q2 GDP report caused Fed rate hike probability for December to tick higher but remain below 50%, per Bloomberg, and another dose of strong economic data could move the needle a bit further. Employment has been solid but inflation—the other side of the Central Bank’s dual mandate—has been stubbornly low, setting the stage for the wage component of the labor report to continue to garner the most scrutiny.

Europe and Asia higher following positive day in U.S.

European equities gained ground, with the euro continuing to give back a recent rally following reports that showed European Central Bank members were getting concerned with the currency’s recent surge, and despite a hotter-than-expected read on eurozone inflation for August. In other economic news, the eurozone unemployment rate remained at 9.1% for July and German retail sales fell more than forecasted for last month. The British pound lost ground on the U.S. dollar and bond yields in the region dipped. The latest round of U.K. Brexit negotiations are wrapping up, while geopolitical, monetary policy and U.S. political uncertainties continue to fester.

The U.K. FTSE 100 Index was up 0.9%, Germany’s DAX Index gained 0.4%, France’s CAC-40 Index rose 0.6%, and Spain’s IBEX 35 Index increased 0.5%, while Italy’s FTSE MIB Index and Switzerland’s Swiss Market Index traded 0.8% to the upside.

Stocks in Asia finished mostly higher after another positive session in the U.S., aided by a stronger-than-expected read on Q2 GDP growth for the world’s largest economy, which helped overshadow lingering global monetary policy and U.S. political uncertainties, and lingering geopolitical concerns. Japanese equities advanced, with the yen extending a pullback from a recent jump and despite a larger-than-expected decline in the nation’s industrial production for July.

Mainland Chinese stocks and those traded in Hong Kong declined, with a stronger-than-expected Manufacturing PMI Index being met with the non-Manufacturing PMI Index that showed growth slowed for August. Australian securities rose, while listings in South Korea declined. Meanwhile, markets in India advanced ahead of the nation’s report on Q2 GDP growth after the closing bell, which showed expansion decelerated to a 5.7% y/y pace, versus forecasts of a 6.5% gain and compared to the 6.1% increase posted in Q1.

Market Insights 8/30/2017

Markets March Higher

U.S. stocks moved higher throughout the day extending yesterday’s resiliency even as North Korean tensions remain elevated, global monetary policy and U.S. political uncertainties fester, and Hurricane Harvey continues to impact the Texas Gulf.

A stronger-than-expected Q2 GDP revision preceded Friday’s labor report, likely bringing the Fed back into sharper focus.

Treasury yields ticked higher and the U.S. dollar rebounded solidly. Gold inched lower and gas continues to run higher in the wake of Harvey. Europe gained ground as the euro rally paused.

The Markets…

The Dow Jones Industrial Average was the days laggard adding on 27 pts, or .12% to 21,892.43

The S&P 500 Index rose 11 pts, or .46%, to 2,457.59

The tech heavy Nasdaq Composite rallied 66 pts, or 1.05% to 6,368.31

WTI crude oil was up $0.04 at $46.48 per barrel and wholesale gasoline is gained $0.03 to $1.63 per gallon.

The Bloomberg gold spot price dipped $0.39 to $1,313.80 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies advanced 0.4% to 92.70.

First revision of Q2 GDP tops forecasts

The second look (of three) at Q2 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of growth of 3.0%, up from the first release’s 2.6% gain. The Bloomberg forecast called for an adjusted 2.7% pace of expansion. Q1 GDP grew by an unrevised 1.2% rate. Personal consumption came in at a 3.3% gain for Q2, higher than the preliminary estimate of a 2.8% increase, and compared to expectations of a 3.0% increase. Personal consumption grew by an unrevised 1.9% in Q1.

The stronger-than-expected revision to GDP came as the larger-than-estimated upward adjustment to consumer spending was accompanied by a bigger-than-forecasted increase in nonresidential fixed investment—business spending—partially offset by a larger decrease in state and local government spending.

On inflation, the GDP Price Index was unrevised at a 1.0% gain, matching forecasts, while the core PCE Index, which excludes food and energy, was unadjusted at a 0.9% rise, in line with expectations.

The ADP Employment Change Report showed private sector payrolls rose by 237,000 jobs in August, above forecasts of a 185,000 gain, while July’s increase of 178,000 jobs was revised to a gain of 201,000. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader August non-farm payroll report, expected to show jobs grew by 180,000 and private sector payrolls rose by 17,000. The unemployment rate is predicted to remain at 4.3% and average hourly earnings are projected to rise 0.2% month-over-month.

The MBA Mortgage Application Index declined 2.3% last week, following the previous week’s 0.5% dip. The decrease came as a 2.0% drop in the Refinance Index was met with a 2.7% fall for the Purchase Index. The average 30-year mortgage rate dipped 1 basis point to 4.11%.

Treasuries dipped, with the yields on the 2-year and 10-year notes, along with the 30-year bond, ticking 1 bp higher to 1.33%, 2.14% and 2.75%, respectively.

Bond yields and the U.S. Dollar Index are rebounding from recent weakness that took the latter to multi-year lows as the flare-up in tensions toward North Korea after its latest missile test joined festering global monetary policy and U.S. political uncertainties, along with the damage caused by Hurricane Harvey.

Europe higher as euro rally pauses

European equity markets traded to the upside, with the euro giving back some of a recent rally that has come as European Central Bank President Mario Draghi last week held off on signaling when the central bank will begin to dial back its stimulus measures. Also, the recent and brief jump in risk aversion on heightened tensions toward North Korea and in the aftermath of Hurricane Harvey in the U.S. appeared to ease.

The markets digested the upbeat read on U.S. Q2 GDP and a stronger-than-expected report on Eurozone economic confidence for August. The British pound was little changed versus the U.S. dollar and bond yields in the region finished mostly higher. In other economic news, German consumer price inflation rose in line with expectations for August.

The U.K. FTSE 100 Index, Italy’s FTSE MIB Index and Switzerland’s Swiss Market Index were up 0.4%, while Germany’s DAX Index, France’s CAC-40 Index and Spain’s IBEX 35 Index advanced 0.5%.

Notes from the CIO

Today’s upwardly revised growth in Q2 GDP, along with Action Economics’ (AE) forecast for further acceleration in Q3 to a 3.5% clip, support the expectation for an additional rate hike in December.

Granted, much will also depend on inflation. If prices stabilize from the recent slowdown, and show signs of edging higher as the year comes to a close, the FOMC will have the opportunity to raise rates one more time for a total of three this year, as was the Fed’s dot plot estimate.

Thursday’s PCE chain price numbers will be important as they are key policy variables. AE is projecting a 0.1% increase for the headline and core in July, after respective readings of unchanged and 0.1% in June. The Q3 pace should jump to 1.7% from Q2’s 0.4%. Action Economics’ reminds us that the market continues to under-appreciate the risk for a December hike, with Fed funds futures suggesting only about a 33% probability.

Market Insights 8/29/2017

Stocks Rebound from Morning Lows

After showing early discontent for North Korea’s latest missile test over Japan, which rattled the global markets overnight, the U.S. equity markets were able to bounce back to finish out the day in the green.

Treasury yields were lower and the U.S. dollar was nearly flat even after an upbeat Consumer Confidence report, as global monetary policy and U.S. political uncertainty and the impact of Hurricane Harvey continued to be an overhang.

Crude oil prices were mixed and gold pared its recent rally.

The Markets…

The Dow Jones Industrial Average (DJIA) rose 57 points (0.3%) to 21,865

The S&P 500 Index added 2 points (0.1%) to 2,446

The Nasdaq Composite gained 19 points (0.3%) to 6,302

In moderate volume, 680 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq

WTI crude oil ticked $0.13 lower to $46.44 per barrel and wholesale gasoline rose $0.03 at $1.60 per gallon

The Bloomberg gold spot price lost $2.24 to $1,307.89 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 92.28

Consumer Confidence improves to a five-month high

The Consumer Confidence Index improved to 122.9 in August from the downwardly revised 120.0 in July, and compared to the Bloomberg estimate of a 120.7 reading. This is the highest level since March as both sentiment toward the present situation and expectations of business conditions for the next six months rose. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—jumped to 18.1 from the 14.5 level posted in July.

Treasuries were higher, as the yields on the 2-year and the 10-year notes fell 3 basis points (bps) to 1.31% and 2.12%, respectively, while the 30-year bond rate declined 2 bps to 2.74%. Treasuries are finding demand and the U.S. Dollar Index continues to fall to a level not seen in over two years amid the flare-up in tensions toward North Korea after its latest missile test, which joins festering global monetary policy and U.S. political uncertainties, along with the continued damage being done in the aftermath of Hurricane Harvey.

Bond yields are low by historical standards and likely to rise, but we don’t see a bubble in the bond market. Slow growth, low inflation and strong investor demand for income are likely to limit any increase in yields. We are cautious. Valuations are high in some fixed income asset classes and we would caution against too much exposure to the riskier parts of the market.

Tomorrow, the economic calendar will offer the second look (of three) at Q2 Gross Domestic Product, the broadest measure of economic output, with economists anticipating a slight upward revision to an annualized q/q rate of expansion of 2.7% from the 2.6% posted in the first release, while personal consumption is expected to be upwardly adjusted to an increase of 3.0% from the 2.8% reported previously, while the inflation gauges of the GDP Price Index and core PCE are forecasted to remain at their respective reading of 1.0% and 0.9%.

Employment data is on tap ahead of Friday’s key labor report in the form of the ADP Employment Change report, with the measure of private sector payrolls expected to show an increase of 185,000 jobs for August following the 178,000 registered in July. MBA Mortgage Applications will also be released.

Europe and Asia geopolitical concerns ramp up

The European equity markets finished broadly lower, with the euro extending its recent rally to a level versus the U.S. dollar that has not been seen since early 2015, while North Korea’s latest missile test over Japan fostered a pullback in risk appetites. The euro has rallied in the wake of Friday’s speeches from Fed Chair Janet Yellen and European Central Bank President Mario Draghi, which failed to deliver any new clues to changes in monetary policy.

The British pound was little changed versus the greenback and bond yields in the region traded lower. The U.K. markets returned to action following yesterday’s holiday break and focus was also on the resumption of Brexit negotiations with the European Union. In economic news, German consumer confidence ticked higher unexpectedly for September and France posted a 1.7% y/y rise in Q2 GDP, a bit shy of the 1.8% gain that was expected, but an acceleration from the 1.1% growth posted in Q1.

The U.K. FTSE 100 Index, France’s CAC-40 Index and Spain’s IBEX 35 Index were down 0.9%, Germany’s DAX Index and Italy’s FTSE MIB Index fell 1.5%, and Switzerland’s Swiss Market Index traded 0.6% lower.

Stocks in Asia finished lower but recouped some losses late in the session. Lingering global monetary policy and U.S. political uncertainties, and the fallout from Hurricane Harvey in Texas, were met with a flare-up in risk aversion as tensions with North Korea ramped up again after the country conducted its latest missile test over Japan.

The yen rallied to weigh on Japanese equities, along with an unexpected decrease in the nation’s household spending for July. Markets in Hong Kong, Australia, South Korea and India all traded lower as well. However, socks in mainland China bucked the trend, finishing modestly higher.

Market Insights 8/28/2017

Stocks Mixed

U.S. equities were mixed with investors eyeing the impact of Hurricane Harvey, as well as the continued decline in the U.S. dollar following Friday’s uneventful speeches from Fed Chair Yellen and ECB President Draghi in Jackson Hole, Wyoming.

Energy stocks were lower as crude oil prices fell, despite a rise in gasoline prices as refineries in Houston are offline. Treasuries were nearly unchanged and gold was solidly higher.

The Markets…

The Dow Jones Industrial Average (DJIA) declined 8 points to 21,806

The S&P 500 Index inched a point higher to 2,444

The Nasdaq Composite gained 17 points (0.3%) to 6,283

In moderate volume, 704 million shares were traded on the NYSE and 1.5 billion shares changed hands on the Nasdaq

WTI crude oil fell $1.30 to $46.57 per barrel and wholesale gasoline rose $0.03 at $1.57 per gallon

The Bloomberg gold spot price jumped $19.87 to $1,311.07 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% lower at 92.21

Preliminary reads on wholesale inventories and trade deficit mixed

The advance goods trade deficit widened more than expected to $65.1 billion in July, from the upwardly revised $64.0 billion in June, and compared to the Bloomberg expectation of $64.5 billion.

Preliminary wholesale inventories rose 0.4% month-over-month in July, versus forecasts for a 0.3% increase, and following June’s downwardly revised 0.6% rise.

The Dallas Fed Manufacturing Activity Index nudged further into a level depicting expansion (a reading above zero). The index improved to 17.0 in August, from 16.8 in July, matching forecasts.

Treasuries were nearly unchanged, as the yields on the 2-year note and the 30-yield were flat at 1.33% and 2.74%, respectively, while the yield on the 10-year note was 1 basis point (bp) higher at 2.16%. Treasury yields and the U.S. Dollar Index saw some pressure on Friday, with the latter extending losses to more than a two-year low, as the markets digested speeches by Fed Chair Janet Yellen and European Central Bank (ECB) President Mario Draghi at the Fed’s highly-anticipated annual symposium in Jackson Hole, Wyoming. Both central bank leaders held off on offering new insight to monetary policy changes. The Fed is expected to begin shrinking its behemoth $4.5 trillion balance sheet next month and uncertainty remains whether it raises rates one more time this year. The ECB is expected to begin discussing the possibility of tapering its stimulus efforts later this year.

This week, low volume, politics and the geopolitical front will likely remain sources of volatility, but a robust back-end loaded U.S. economic calendar is poised to garner attention, headlined by Friday’s August non-farm payroll report. A look at August Consumer Confidence will get the ball rolling tomorrow, with economists anticipating a level of 120.3, slightly lower than the 121.1 posted in July, followed by Wednesday’s second read (of three) on Q2 GDP and July personal income and spending data, while August releases of the ISM Manufacturing Index, final University of Michigan Consumer Sentiment Index and auto sales will join the labor report to close out the week.

Some housing data is also on tap for tomorrow, with the S&P Corelogic Case-Shiller Home Price Index slated for release, forecasted to show home prices in the 20-city composite rose 0.3% m/m on a seasonally-adjusted basis, and 5.8% y/y.

Europe dips as euro extends rally, Asia mixed

European equities dipped, with the markets reacting to late-Friday’s speech from ECB President Mario Draghi that offered no new monetary policy clues and boosted the euro to a two-and-half year high versus the U.S. dollar. The euro extended gains and the markets also assessed the impact of the weekend’s Hurricane Harvey in the U.S., which continues to damage parts of Texas. Volume was lighter than usual as markets in the U.K. were closed for a holiday, though Brexit negotiations resumed and the British pound gained ground on the greenback. In economic news in the region, Italian economic, manufacturing and consumer sentiment reports all improved for August. Bond yields in the region finished mostly lower.

Stocks in Asia finished mixed, with the markets digesting speeches from central bank leaders in the U.S. and Europe, which lacked details regarding changes to the path of monetary policy. Also, the impact of Hurricane Harvey in Texas was closely followed, with an eye on the oil and gas markets, while U.S. political and global trade uncertainty lingered. Recently flared-up tensions toward North Korea appeared to continue to recede.

Japanese equities finished flat with the yen ticking slightly higher, while stocks in mainland China and Hong Kong gained modest ground, with earnings optimism bolstering brokerage stocks. Australia securities declined, with weakness seen in financials, and those traded in South Korea also fell, as technology issues weighed on the markets. Finally, stocks in India advanced.

Tomorrow’s international economic calendar will include personal income and wage data from Japan, consumer confidence from Germany, and GDP and consumer spending from France.

U.S. Market Weekly Summary – Week Ending 08/25/2017

S&P 500 Posts 0.7% Weekly Gain, Snapping Two-Week Losing Streak; Consumer Staples Only Sector in Red

The Standard & Poor’s 500 index rose 0.7% this week, snapping a two-week losing streak, as every sector except consumer staples recovered some of their recent declines.

The market benchmark ended the week at 2,443.05, up from last week’s closing level of 2,425.55. The real-estate sector had the biggest percentage gain of the week, up 2.3%, while the telecommunications sector had the next-biggest gain, up 2.0%. Just one sector was in the red for the week: consumer staples, down 1.0%.

The real-estate sector’s gainers included Iron Mountain (IRM), which rose 4.3% this week as the records-management and data-backup company said it has closed the amendment and restatement of its existing revolving credit facility of $1.75 billion and its existing $250 million term loan A with a syndicate of 24 banks.

The telecommunications sector’s advance came as New Jersey approved CenturyLink’s (CTL) $34 billion acquisition of Level 3 Communications (LVLT), clearing another hurdle for the companies’ merger. CenturyLink shares rose 5.6% this week while shares of Level 3 Communications added 3.0%.

The health-care sector was also strong this week. Among its gainers, Vertex Pharmaceuticals (VRTX) added 3.5% as the pharmaceutical company said its applications for the use of tezacaftor/ivacaftor combination to treat cystic fibrosis have been accepted by the US Food & Drug Administration as well as the European Medicines Agency. The company said the FDA granted priority review status on the new-drug application, with an action date of Feb. 28, 2018.

The consumer-staples sector’s drop came as some companies’ earnings disappointed. Among the decliners, shares of J.M. Smucker (SJM) fell 14% this week as the company released weaker-than-expected fiscal Q1 results and cut its fiscal 2018 earnings-per-share guidance.

Also weighing on consumer staples, Amazon.com (AMZN) said it would lower prices at Whole Foods Market (WFMI), a move expected to put negative pressure on grocers and food sellers. Shares of Kroger (KR) fell 4.9% this week while Costco (COST) lost 2.9% and Wal-Mart Stores (WMT) shed 0.9%.

Market Insights 8/25/2017

Stocks Mixed Drift Higher

U.S. equities finished out the week mixed in a choppy session, as a morning relief rally succumbed to the recent persistent uncertainty.

Early gains came as political concerns seemed to have eased somewhat, with President Trump’s top economic advisor Gary Cohn suggesting he will not leave his post. However, the highly-anticipated speeches from Fed Chair Janet Yellen and ECB President Mario Draghi didn’t offer anything new to remedy swirling anxiety surrounding global monetary policy.

The U.S. dollar fell following Yellen’s and Draghi’s remarks, but bounced off the lows of the day, and Treasury yields ticked lower, while gold was higher and crude oil prices were mixed.

The Markets….

The Dow Jones Industrial Average rose 30 points (0.1%) to 21,814

The S&P 500 Index added 4 points (0.2%) to 2,443

The Nasdaq Composite shed 6 points (0.1%) to 6,266

In light-to-moderate volume, 663 million shares were traded on the NYSE and 1.4 billion shares changed hands on the Nasdaq

WTI crude oil rose $0.44 to $47.87 per barrel and wholesale gasoline lost $0.01 at $1.62 per gallon

The Bloomberg gold spot price gained $4.42 to $1,290.82 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 92.50

Markets were higher for the week, as the DJIA increased 0.6%, the S&P 500 Index rose 0.7% and the Nasdaq Composite gained 0.8%

Early look at July manufacturing demand show core orders grew

July preliminary durable goods orders fell 6.8% month-over-month, compared to the Bloomberg estimate of a 6.0% drop, and June’s 6.4% jump was unrevised. Ex-transportation, orders were 0.5% higher m/m, compared to forecasts of a 0.4% gain and versus June’s unrevised 0.1% rise. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, grew 0.4%, in line with projections, and following the unrevised flat reading posted in the month prior.

The headline figure was driven by the volatile component of transportation equipment as nondefense aircraft and parts orders fell nearly 71% m/m, more than offsetting a 48% rise in defense aircraft and parts, and following the prior month’s 129% surge. Demand for computers and related products, along with electrical equipment, appliances and components led the rise in core durable goods orders, partially offset by declines in orders for communications and machinery goods.

Treasuries were mostly higher, as the yield on the 2-year note was little changed at 1.33%, while the yield on the 10-year note decreased 3 basis points (bps) to 2.17% and the 30-year bond rate declined 2 bps to 2.75%.

Treasury yields came under pressure in the wake of Fed Chairwoman Janet Yellen’s speech at the Fed’s symposium in Jackson Hole, Wyoming. Amid the backdrop of festering global monetary policy uncertainty on signs of steady economic growth but low inflation, Yellen offered little in terms of economic and monetary policy commentary, focusing on financial regulation.

She pointed out progress in putting in place a regulatory and supervisory structure to lower risks to financial stability and achieving a stronger financial system. Yellen added that any changes to post-crisis financial reforms should be “modest.” She did note that “substantial progress has been made” toward the Fed’s economic objectives of maximum employment and price stability. The markets were looking for any clues to the possibility of another rate hike this year and if the Central Bank will begin the process of shrinking its behemoth $4.5 trillion balance sheet next month as most are expecting.

Similar to Yellen, European Central Bank President (ECB) Mario Draghi steered clear from commenting on future monetary policy in his afternoon speech at the Fed symposium, instead focusing on trade and tax regulations. The euro jumped following Draghi’s remarks, adding pressure to the U.S dollar, as the lack of commentary toward future policy only added to the recent uncertainty.

Europe gives up gains, Asia mostly higher as monetary policy eyed

European stocks relinquished early gains and finished mostly lower, with the euro and British pound gaining noticeable ground on the greenback after Fed Chair Janet Yellen offered few new clues to monetary policy at the highly-anticipated Fed symposium in Jackson Hole, Wyoming. Caution appeared evident ahead of today’s speech by ECB President Draghi at the Fed’s symposium. Bond yields in the region finished mixed. Germany reported Q2 GDP growth of 2.1% y/y, in line with forecasts, and versus the 1.9% expansion posted in Q1. In other economic news, the expectations component of the August German business confidence report unexpectedly improved, while French consumer confidence dipped as expected for this month.

The U.K. FTSE 100 Index, Germany’s DAX Index and Spain’s IBEX 35 Index dipped 0.1%, France’s CAC-40 Index declined 0.2%, and Switzerland’s Swiss Market Index decreased 0.4%, while Italy’s FTSE MIB Index ticked 0.1% higher.

Stocks in Asia finished mostly higher to close out the week even as potential volatility-boosting speeches from the Fed and ECB loomed on the horizon, while U.S. political and global trade uncertainty festered. Japanese equities rose, with the yen extending yesterday’s decline, and as the Asian country reported that national consumer price inflation rose in line with expectations in July, while Tokyo consumer price inflation for August came in hotter than expected. Mainland Chinese stocks and those listed in Hong Kong rallied, with earnings results in the region boosting sentiment, while securities in South Korea overcame early weakness and ticked slightly higher.

Stocks avoid third straight weekly decline

U.S. stocks rebounded from back-to-back weekly declines in typical late-August subdued volume. Earnings season wrapped up with mixed results from the consumer discretionary and staples sectors, but Q2 remained on track to post profit growth breaching 9.0% and revenue expansion topping 5.0%. Even as U.S. political uncertainty festered, sentiment appeared soothed by reports of progress on tax reform and as President Donald Trump’s top economic advisor Gary Cohn suggested he will not leave his post.

Signs of continued global growth likely buoyed the markets, with eurozone and U.S. business activity reports from Markit showing expansion persisted in August, helping overshadow disappointing U.S. existing and new home sales reports. Stocks showed some resiliency in the face of lingering global monetary policy as highly-anticipated speeches by Fed Chair Yellen and ECB President Draghi came into focus ahead their September monetary policy meetings. The U.S. Dollar Index fell back to lows not seen since May 2016 and crude oil prices continued to drop, while the Treasury yield curve flattened a bit.

Next week, low volume, politics and the geopolitical front will likely remain sources of volatility, but a robust back-end loaded U.S. economic calendar is poised to garner attention, headlined by Friday’s August nonfarm payroll report. Consumer Confidence and the second (of three) read on Q2 GDP will get the ball rolling, followed by July personal income and spending data, while August releases of the ISM Manufacturing Index, final University of Michigan Consumer Sentiment Index and auto sales will join the labor report to close out the week.

International reports due out next week that deserve a mention include: Australia—building approvals. China—industrial profits, Manufacturing and non-Manufacturing PMIs. India—Q2 GDP. Japan—household spending, retail sales, and industrial production. Eurozone—economic confidence, unemployment rate, consumer price inflation and Markit’s Manufacturing PMI, along with German retail sales and unemployment change. U.K.—mortgage approvals and Markit’s Manufacturing PMI.

Market Insights 8/24/2017

Stocks Seek Direction

U.S. equities finished modestly lower after trading in a fairly narrow range, as caution prevailed ahead of tomorrow’s much-anticipated speeches by Fed Chief Yellen and ECB President Draghi at the Fed’s Jackson Hole symposium.

Treasuries were lower following another cooler-than-expected housing report, and volume was again subdued with the markets continuing to grapple with growing U.S. political uncertainty.

The U.S. dollar was nearly unchanged, while gold and crude oil prices were lower.

The Markets..

The Dow Jones Industrial Average declined 29 points (0.1%) to 21,783

The S&P 500 Index was 5 points (0.2%) lower at 2,439

The Nasdaq Composite decreased 7 points (0.1%) to 6,271

In light-to-moderate volume, 718 million shares were traded on the NYSE and 1.5 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.98 to $47.43 per barrel and wholesale gasoline was down by $0.01 to $1.62 per gallon

The Bloomberg gold spot price fell $5.04 to $1,285.92 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 93.29

Existing home sales drop

Existing-home sales in July declined 1.3% month-over-month to a 5.44 million annual rate—the lowest since August 2016—compared to the Bloomberg forecast of a 5.55 million pace, and versus June’s downwardly revised 5.51 million rate. Sales of single-family homes declined 0.8% m/m and purchases of multi-family structures fell 4.8%, but both were higher y/y. The median existing-home price was up 6.2% y/y at $258,300. Unsold inventory came in at a 4.2-month pace at the current sales rate, down from the 4.8 months rate a year ago. Inventory of homes for sale dropped 1.0% m/m, and are down 9.0% y/y, falling for 26 consecutive months. Sales fell in the Northeast and Midwest and are below year ago levels, while sales rose in the South and West and are up y/y. Existing home sales are based on contract closings instead of signings and account for the majority of the housing sales market.

National Association of Realtors (NAR) Chief Economist Lawrence Yun said, “Buyer interest in most of the country has held up strongly this summer and homes are selling fast, but the negative effect of not enough inventory to choose from and its pressure on overall affordability put the brakes on what should’ve been a higher sales pace.”

Weekly initial jobless claims rose by 2,000 to 234,000 last week, below the Bloomberg forecast of 238,000, with the prior week’s figure being unrevised at 232,000. The four-week moving average declined by 2,750 to 237,750, while continuing claims were unchanged at 1,954,000, north of estimates of 1,950,000.

Treasuries finished lower, as the yields on the 2-year and 10-year notes, along with the 30-year bond, rose 2 basis points (bps) to 1.32%, 2.19% and 2.76%, respectively. Treasury yields and the U.S. dollar nudged higher ahead of tomorrow’s speeches from Fed Chief Janet Yellen and European Central Bank (ECB) President Mario Draghi at the key Fed symposium in Jackson Hole, Wyoming, which kicked off today. Amid the backdrop of global economic expansion but low inflation, the markets are grappling with whether the Fed will hike rates again this year and begin its balance sheet reduction next month, while looking for clues to the timing of the ECB’s commencement of tapering its stimulus measures.

The lone report on tomorrow’s economic calendar is the preliminary durable goods orders report, with economists forecasting a 5.8% decline m/m for July, while ex-autos, sales are projected to have gained 0.4% m/m and non-defense capital goods ex-aircraft is expected to have moved 0.5% higher .

Europe mostly higher, Asia mixed ahead of central bank speeches

European equities mostly posted modest gains following yesterday’s slump, aided by unexpected improvement in French business and manufacturing sentiment reports, while the euro paused versus the U.S. dollar after yesterday’s gain. The markets were a bit hamstrung by festering global trade uneasiness and exacerbated U.S. political uncertainty, as well as caution ahead of tomorrow’s highly-anticipated speeches from Fed Chief Janet Yellen and ECB President Mario Draghi.

The U.K. FTSE 100 Index was up 0.3%, Germany’s DAX Index ticked 0.1% higher, Spain’s IBEX 35 Index rose 0.2%, and Italy’s FTSE MIB Index increased 0.5%, while France’s CAC-40 Index was flat and Switzerland’s Swiss Market Index declined 0.2%.

Stocks in Asia finished mixed following the down day in the U.S. on exacerbated political uncertainty and global trade uneasiness, while the markets tread cautiously ahead of key speeches from the Fed and ECB tomorrow.

Japanese equities declined, even as the yen pared yesterday’s gains, while stocks in South Korea gained modest ground. Shares in mainland China fell, but those traded in Hong Kong advanced, while markets in Australia and India ticked slightly higher.

Market Insights 8/23/2017

Stocks Slump

U.S. stocks were unable to breech the unchanged mark during the trading session, closing lower as last night’s speech by President Trump cast a shadow over global trade issues and has market participants pondering a possible government shutdown.

Volume remained on the lighter side, while on Friday Fed Chair Yellen will speak at the Central Bank’s annual symposium in Jackson Hole, WY.

Treasury yields and the U.S. dollar were lower and crude oil prices and gold were higher.

The Markets…

The Dow Jones Industrial Average declined 88 points (0.4%) to 21,812

The S&P 500 Index was 8 points (0.3%) lower at 2,444

The Nasdaq Composite decreased 19 points (0.3%) to 6,278

In light-to-moderate volume, 682 million shares were traded on the NYSE and 1.5 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.58 to $48.41 per barrel and wholesale gasoline was up by $0.03 to $1.62 per gallon

The Bloomberg gold spot price increased $5.35 to $1,290.42 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 93.16

Business activity continues to show expansion, new home sales fall

The preliminary Markit U.S. Manufacturing PMI Index unexpectedly dipped to 52.5 in August, from July’s 53.3 level and compared to the Bloomberg expectation of an increase to 53.5. The preliminary Markit U.S. Services PMI Index showed growth for the key U.S. sector this month accelerated more than expected, rising to 56.9 from July’s 54.7 level, above forecasts calling for a rise to 55.0. Readings above 50 for both reports denote expansion in activity.

Tomorrow’s economic calendar will also yield weekly initial jobless claims, forecasted to have moved higher to a level of 238,000 from 232,000 last week and the latest Kansas City Fed Manufacturing Index, expected to tick higher to 11 in August from the 10 registered in July with a reading above zero denoting expansion in activity.

New home salesdropped 9.4% month-over-month in July to an annual rate of 571,000, well below the forecasts calling for 610,000 units and the upwardly revised 630,000 unit pace in June. The median home price was up 6.3% y/y to $313,700. New home inventory increased to 5.8 months of supply at the current sales pace from 5.2 in June. Sales fell sharply m/m in the Northeast and West, dipped in the South, but were up in the Midwest. Y/Y, sales are down in all regions except the West. New home sales are based on contract signings instead of closings.

Tomorrow, the economic calendar will complete the July housing sales picture with the release of existing home sales, projected to show contract closings on previously-owned homes rose 0.5% m/m to an annual rate of 5.55 million units. As low inventory has led to an acceleration in home prices that has outpaced income growth, affordability is a major factor threatening the continued housing recovery. The price and supply data of the report are likely going to garner the highest scrutiny.

The MBA Mortgage Application Index dipped 0.5% last week, following the previous week’s 0.1% gain. The decline came as a 0.3% rise in the Refinance Index was more than offset by a 1.5% drop for the Purchase Index. The average 30-year mortgage rate remained at 4.12%.

Treasuries traded higher with the yield on the 2-year note dipping 2 basis points to 1.31%, the yield on the 10-year note dropping 5 bps to 2.17% and the 30-year bond rate declining 4 bps to 2.75%.

Treasury yields and the U.S. dollar remained choppy ahead of Friday’s key Fed symposium in Jackson Hole, Wyoming, where Fed Chief Janet Yellen and European Central Bank (ECB) President Mario Draghi are expected to speak. Both regions face subdued inflation and modest economic expansion and the markets will likely be looking for clues to the timing of the beginning of the Fed’s reduction of its behemoth balance sheet and whether the Central Bank has one more rate hike in it this year. Also, focus will be on if the ECB’s Draghi delivers a new policy message on tapering its stimulus measures, though reports have speculated that he will not deliver any new policy commentary.

Europe sees pressure after yesterday’s gain, Asia mixed on trade concerns

European equities gave back some of yesterday’s advance, with the euro gaining ground on the U.S. dollar after an upbeat economic report in the region. The markets also continued to grapple with exacerbated global trade and political uncertainty in the wake of a speech last night by U.S. President Donald Trump. The stock markets shrugged off Markit’s preliminary read on eurozone business activity for August that showed growth in unexpectedly accelerated, led by the manufacturing sector. The British pound was lower versus the greenback and bond yields in the region finished mixed. ECB President Mario Draghi spoke today but offered no new clues to any policy shifts at the central bank, ahead of Friday’s speech in Jackson Hole, Wyoming.

The U.K. FTSE 100 Index was little changed, France’s CAC-40 Index decreased 0.3%, Germany’s DAX Index and Italy’s FTSE MIB Index declined 0.5%, Spain’s IBEX 35 Index fell 0.7%, and Switzerland’s Swiss Market Index dipped 0.1%.

Stocks in Asia finished mixed following yesterday’s gains, with the markets grappling with exacerbated trade concerns amid recent actions by the U.S. toward China and as President Trump delivered a speech last night that appeared to raise concerns about the future of NAFTA and the possibility of a U.S. government shutdown.

Japanese equities increased on the heels of yesterday’s drop in the yen and as a report showed the growth in the nation’s manufacturing output accelerated slightly in August. Australian securities declined amid weakness in financials, healthcare and technology issues, and Chinese stocks dipped. Markets in Hong Kong were closed due to Typhoon Hato. Indian shares advanced, led by property-related stocks, and South Korean equities ticked higher.

Tomorrow, the international economic docket will yield the Leading Index from Japan, business confidence from France and GDP, the Index of Services and total business investment from the U.K.