Monthly Archives: August 2019

U.S. Market Weekly Summary – Week Ending 08/30/2019

S&P 500 Posts 2.8% Weekly Gain, Marking First Positive Week Since July, But Ends August Down 1.58% on Month

U.S. equities finished the trading session mixed, but notched solid gains for the week, as optimism surrounding cooled U.S.-China trade worries and stabilization in Treasury yields came up against some mixed earnings and economic data. As well, volume was a bit lighter than usual ahead of the three-day Labor Day holiday weekend. Treasury yields finished lower and the U.S. dollar gained solid ground, while gold and crude oil prices fell.

The Standard & Poor’s 500 index rose 2.8% this week, marking the index’s first positive week since the last week of July and snapping a four-week losing streak. However, the advance put only a dent in the benchmark’s decline for the month as the S&P 500 finished down 1.58% its only second negative month of 2019– meanwhile the DJIA increased 3.0% and the Nasdaq Composite advanced 2.7%.

This week’s advance came as the US-China trade concerns that weighed on the market for much of August eased somewhat in recent days amid conciliatory remarks from both the US and China. Friday, China’s Foreign Ministry said US and Chinese negotiators are maintaining “effective communication” in their efforts to reach a trade deal.

All of the S&P 500′s 11 sectors rose this week, with industrials and communication services posting the largest gains, up 3.6% and 3.4% respectively. In the industrial sector, the week’s gainers included United Parcel Service (UPS) with a 6.6% increase.

Market Insights 8/29/2019

U.S. equities finished the trading session higher, as confirmation from China that it and the U.S. have continued talks, without any suggestion of retaliatory measures, boosted sentiment.

The economic calendar was also robust, as Q2 GDP was revised slightly lower but in line with estimates and personal consumption was adjusted upward and jobless claims nudged higher.

The Markets…

The Dow Jones Industrial Average rose 326 points (1.3%) to 26,362

The S&P 500 Index advanced 37 points (1.3%) to 2,925

The Nasdaq Composite increased 117 points (1.5%) to 7,973

In moderately-light volume, 712 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil moved $0.93 higher to $56.71 per barrel and wholesale gasoline was up $0.01 at $1.57 per gallon

The Bloomberg gold spot price lost $10.36 to $1,528.65 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.3% higher to 98.47

Q2 GDP revised slightly lower, jobless claims nudge higher

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 2.0%, from the first release’s 2.1% gain, matching the Bloomberg forecast. Q1 GDP grew by an unrevised 3.1% rate. Personal consumption was revised to a 4.7% increase, from the first estimate of a 4.3% gain, where it was expected to remain, and compared to the unrevised 1.1% rise seen in Q1.

On inflation, the GDP Price Index was unrevised at a 2.4% increase, matching estimates, while the core PCE Index, which excludes food and energy, was adjusted to a 1.7% rise, from the previous estimate of a 1.8% increase, compared to forecasts to be unadjusted.

Weekly initial jobless claims rose by 4,000 to 215,000, versus estimates of 214,000, with the prior week’s figure being revised higher by 2,000 to 211,000. The four-week moving average dipped by 500 to 214,500, while continuing claims increased by 22,000 to 1,698,000, north of estimates of 1,686,000.

Pending home sales fell 2.5% m/m in July, versus projections of a flat reading, and following the unrevised 2.8% gain registered in June. Sales were 1.7% higher y/y, compared to the expected 1.8% rise. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales.

Treasuries were lower, as the yield on the 2-year note ticked 1 basis point (bp) higher to 1.52%, the yield on the 10-year note gained 3 bps to 1.50%, and the 30-year bond rate advanced 2 bps to 1.96%.

The week’s economic calendar will close out tomorrow with personal income and spending, forecasted to show income rose 0.3% m/m during July and spending increased 0.5%, as well as the final University of Michigan Consumer Sentiment Index, expected to rise to a level of 92.3 from 92.1.

Europe higher as U.S.-China trade concerns remain calm, Asia mixed

European equities finished higher, as China’s suggestion of continued talks with the U.S. and lack of a signal that it will escalate retaliatory measures kept trade worries relatively in check, despite the looming September 1st deadline for further tariffs to begin.

Global bond yields have recovered somewhat, which may also have lent additional support, after the most recent plunge that has escalated global recession concerns and amplified the inversion of a key portion of the U.S. Treasury yield curve. U.K. Brexit uneasiness continued in the wake of Prime Minister Boris Johnson’s suspension of parliament that increased fears of a no-deal Brexit ahead of an October 31st deadline, but Italian political turmoil appeared to cool as two opposing parties announced an attempt to form a coalition.

The euro and the British pound dipped versus the U.S. dollar, with German consumer price inflation coming in cooler than expected, France’s GDP growth being revised higher than initially estimated, and Eurozone economic confidence surprisingly improving.

Stocks in Asia finished mixed, with the markets grappling with festering global recession concerns that have been exacerbated by the drop in bond yields and the intensified inversion of a key portion of the U.S. Treasury yield curve. Also, the markets remain skittish regarding the elevated trade tensions between the U.S. and China as tariffs are expected to ramp-up September 1st. Amid the increased attention on trade from the global markets,

Stocks in Japan dipped, with the yen gaining back some of yesterday’s losses, while Indian securities fell. Mainland Chinese equities also edged lower, but those traded in Hong Kong gained ground. Australian listings ticked higher, and shares in South Korea declined, with the market remaining uneasy amid the escalated trade tensions with Japan.

Market Insights 8/27/2019

U.S. equities finished lower, as early gains that came amid cooled trade tensions between the U.S. and China fell victim to worries surrounding the persistent decline in bond rates with the inversion between the 2-year and 10-year Treasury notes widening to heighten recession concerns.

The U.S. dollar ticked lower, trimming some of yesterday’s advance, even as Consumer Confidence came in well above expectations and another read on regional manufacturing activity unexpectedly moved back into expansion territory.

Crude oil prices finished higher in choppy trading, and gold rallied on the upped recession worries.

The Markets…

The Dow Jones Industrial Average declined 121 points (0.5%) to 25,778

The S&P 500 Index shed 9 points (0.3%) to 2,869

The Nasdaq Composite lost 27 points (0.3%) to 7,827

In moderate volume, 889 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil moved $1.29 higher to $54.93 per barrel and wholesale gasoline was up $0.03 at $1.54 per gallon

The Bloomberg gold spot price rose $14.58 to $1,541.89 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% lower to 98.02

Consumer Confidence well above expectations, home prices miss forecasts

The Consumer Confidence Index dipped to 135.1 in August, from July’s upwardly-revised 135.8 level, well above the Bloomberg estimate of 129.0. The index retreated slightly from the highest level since November 2018, as the Present Situation Index improved solidly month-over-month, while the Expectations Index of business conditions for the next six months decreased. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—rose to 39.4 from the 33.1 level posted in July.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 2.1% y/y gain in home prices in June, versus expectations of a 2.3% increase. M/M, home prices were little changed on a seasonally adjusted basis, compared to forecasts of a 0.1% rise.

Treasuries were higher, as the yield on the 2-year note fell 2 basis points (bps) to 1.52%, the yield on the 10-year note declined 7 bps to 1.48%, and the 30-year bond rate dropped 8 bps to 1.96%.

The stock markets turned lower in the midst of escalating recession worries after Treasury yields accelerated to the downside, with the gap between the 2-year and 10-year notes widening to its worst level since 2007, while the 30-year bond rate finished below the 2.00% level.

The early gains came as President Donald Trump suggested China is willing to resume talks, which appeared to de-escalate concerns about a continued ramp-up of the trade war after tensions intensified with both countries trading increased tariff threats.

Europe mostly higher, Asia rebounds amid calmed trade concerns

European equities finished mostly higher, adding to yesterday’s gains as global sentiment regarding the recently intensified trade tensions between the U.S and China seemed to continue to cool on the heels of comments from U.S. President Donald Trump suggesting China wants to resume talks. Automakers gained solid ground on reports that China is considering relaxing restrictions on auto purchases, while the upbeat U.S. Consumer Confidence report appeared to add to the positive backdrop.

The euro was lower versus the U.S. dollar and the British pound gained ground, while bond yields in the region were lower. In economic news, Germany’s Q2 GDP was unrevised, showing contraction, though reads on French consumer, business and manufacturing sentiment for August came in mostly above expectations.

Stocks in Asia finished mostly higher, with the U.S. and European markets recovering yesterday as trade concerns seemed to be soothed by comments from U.S. President Donald Trump that suggested China was willing to resume talks. This comes after Friday’s sharp drop for stocks as China and the U.S. exchanged threats of increased tariffs.

Stocks in Japan advanced, with the yen softening a bit after a recent rally, while markets in South Korea and India both moved to the upside. Australian securities were higher and mainland Chinese equities increased, while those traded in Hong Kong dipped, with data showing China’s industrial profits rebounded though Hong Kong’s exports continued to fall for July.

Market Insights 8/26/2019

U.S. equities finished higher, as the intensified trade tensions between the U.S. and China that hit stocks on Friday after the two countries traded barbs over tariffs appeared to have cooled after President Trump offered comments suggesting China wants to resume talks.

Treasury yields were lower and the U.S. dollar recovered some of late last week’s drop, while crude oil prices were lower and gold was able to modestly add to a recent rally.

The Markets…

The Dow Jones Industrial Average rose 270 points (1.1%) to 25,899

The S&P 500 Index added 31 points (1.1%) to 2,878

The Nasdaq Composite gained 102 points (1.3%) to 7,854

In light volume, 706 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil moved $0.53 lower to $53.64 per barrel and wholesale gasoline was down $0.02 at $1.51 per gallon

The Bloomberg gold spot price nudged $1.57 higher to $1,528.53 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.4% to 98.06

Durable goods orders mixed

July preliminary durable goods orders rose 2.1% month-over-month, compared to the Bloomberg estimate of a 1.2% gain and June’s downwardly-revised 1.8% rise. Ex-transportation, orders declined 0.4% m/m, versus forecasts of a flat reading and compared to June’s negatively-adjusted 0.8% increase. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, advanced 0.4%, compared to projections of a flat reading, and the prior month’s figure was downwardly-revised to a 0.9% rise.

This week, the economic calendar is likely to gain more attention in the aftermath of earnings season and as the docket is chock full of releases as today’s durable goods orders and regional manufacturing data will be followed by Consumer Confidence, the first revision of Q2 GDP, personal income and spending, and the final August University of Michigan Consumer Sentiment Index.

Treasuries were higher, as the yield on the 2-year note was flat at 1.54%, while the yields on the 10-year note and the 30-year bond dipped 1 basis point to 1.53% and 2.03%, respectively.

The U.S. dollar recovered, along with the stock markets, while gold was able to modestly add to a recent rally, on the heels of Friday’s sharp selloff as the U.S. and China both escalated trade tensions with threats of higher tariffs. The rebound for the stock markets came as the escalated U.S.-China trade tensions appeared to cool a bit after U.S. President Donald Trump said China wants to get back to the negotiation table.

Europe mostly higher as U.S.-China trade fears de-escalate

European equities overcame early losses to finish mostly higher as comments from U.S. President Donald Trump that suggested China wants to resume trade talks seemed to ease concerns a bit following Friday’s escalation of tensions after both countries traded threats of increased tariffs. The de-escalation of trade tensions between the world’s two largest economies countered economic data from within the region showing August German business sentiment deteriorated more than expected.

The euro and British pound saw some pressure versus the U.S. dollar, while bond yields in the region were mixed. Volume was lighter than usual with the U.K. markets closed for a holiday.

Stocks in Asia mostly declined sharply with Friday’s increased trade friction between the U.S. and China weighing on sentiment and conviction, after China’s threat of increased tariffs on U.S. goods being met with plans from the U.S. to boost levies on Chinese goods.

Stocks in Japan dropped, with the yen gaining solid ground in the wake of the escalated trade tensions, while those traded in mainland China and Hong Kong were also sharply lower. Markets in Australia and South Korea declined, but shares in India rallied amid eased fiscal concerns.

Random Thoughts

On Friday, while awaiting commentary from Fed Chair Powell from Jackson Hole, investors were blindsided by news that China would retaliate with tariffs on an additional $75 billion in U.S. goods, only to have the U.S. then up the ante.

As a result, stocks slumped on the day and for the week, with the S&P Composite 1500 slipping 1.5%, accompanied lower by all cap sizes and sectors and 86% of its sub-industries.

Prior to Friday, all investor eyes and ears seemed to be focused on the Fed, with the growing assumption that the Fed may be preparing the markets for no rate cut in September. First, the minutes from the July FOMC meeting reiterated that it regarded the rate cut as a recalibration rather than the start of a new easing cycle. What’s more, the notes reminded investors that policy would still be data dependent. In addition, three Fed presidents floated trial balloons implying that the Fed should leave rates alone at their upcoming meeting. Finally, recent economic data showed that the U.S. economy remains strong and in no need of monetary assistance. Regardless, we think the elevated trade war tensions will now likely force the Fed’s hand in September.

The tug of war between geo-political tensions and their effect on monetary policy, combined with the implications from an on-again/off-again inversion of the 10/2-year yield curve keep markets (and FOMC members) on edge.

Investors are reminded that stock market declines have anticipated the start of 11 of the 12 recessions since WWII and have done so by nearly seven months. What’s more, from a sector perspective, there has typically been no place to hide, as the difference between the returns of cyclical and defensive sectors has been in magnitude, not direction.

Finally, while the fundamentals may not currently be leading us toward recession, the trade turmoil could end up dragging us into one.

U.S. Market Weekly Summary – Week Ending 08/23/2019

S&P 500 Posts 1.4% Weekly Drop, Led by Materials, Communication Services as Trade Issues Escalate

The Standard & Poor’s 500 index fell 1.4% this week, deepening the market benchmark’s drop for August as trade tensions increased.

The S&P 500 ended the week at 2,847.11, down from last week’s closing level of 2,888.68. The index is now down 4.5% for the month of August and down 6.0% from the record high it reached in July. However, it is still well into the black for 2019 with a year-to-date gain of 14%.

This week’s slide, which marks the S&P 500′s fourth week in a row in the red, came as trade tensions between the US and China escalated, with China unveiling a plan Friday to impose tariffs of 5% and 10% on almost all of the US imports that haven’t yet received punitive taxes.

China’s latest plan, which comes in response to a US threat to put punitive tariffs on another $300 billion of Chinese goods, was met with a demand by US President Donald Trump that US companies “immediately start looking for an alternative to China.”

The materials sector had the largest percentage drop this week, down 3.0%, followed by communication services, down 2.0%. Most other sectors were also in the red but two managed to eke out gains: Utilities rose 0.2%, followed by a 0.1% increase in consumer discretionary.

The materials sector’s drop came as copper futures fell on concerns about how demand for the commodity would be impacted by the trade issues. Shares of Freeport-McMoRan (FCX), which is one of the world’s largest publicly traded copper producers, fell 3.0% on the week amid the concerns.

In communication services, shares of Facebook weighed with a 3.2% drop as filings showed the social-media company’s CEO, Mark Zuckerberg, sold just under 1.6 million shares of the company in August. The drop also came as news reports said documents showed Facebook learned about the Cambridge Analytica scandal three months earlier than the company previously said it did.

On the upside, the utilities sector’s gain came as investors sought safety; US utilities stocks are often considered a haven in times of economic volatility as US utilities services tend to be in demand regardless of economic strength. The gainers included FirstEnergy (FE), which rose 0.7% on the week.

Market Insights 8/22/2019

U.S. stocks finished mixed as hopes of a near-term rate cut were tempered as some Fed members indicated that a September cut is not a certainty. The Fed began its key gathering in Jackson Hole, Wyoming, which will culminate with tomorrow’s speech from Fed Chief Jerome Powell, adding an additional layer of caution.

In economic news, jobless claims fell and the Leading Index rebounded by the most in nearly a year, though Markit’s manufacturing report showed the first contraction since 2009.

Treasury yields rose and the U.S dollar nudged lower, while crude oil prices and gold also lost ground.

The Markets….

The Dow Jones Industrial Average rose 50 points (0.2%) to 26,252

The S&P 500 Index decreased 2 points (0.1%) to 2,923

The Nasdaq Composite declined 29 points (0.4%) to 7,991

In light volume, 683 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil fell $0.45 to $55.68 per barrel and wholesale gasoline was $0.01 higher at $1.69 per gallon

The Bloomberg gold spot price declined $4.08 to $1,498.57 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% lower at 98.17

Jobless claims decline, manufacturing activity contracts, Leading Indicators jump

Weekly initial jobless claims fell by 12,000 to 209,000, versus the Bloomberg estimate of 216,000, with the prior week’s figure being revised higher by 1,000 to 221,000. The four-week moving average ticked higher by 500 to 214,500, while continuing claims dropped by 54,000 to 1,674,000, south of estimates of 1,707,000.

The Conference Board’s Index of Leading Economic Indicators (LEI) for July rose 0.5% month-over-month —the largest increase in nearly a year—versus projections of a 0.3% gain and compared to June’s favorably-revised 0.1% decline. Positive contributions from the jobless claims, building permits, stock prices, credit and consumer expectations components of the index, more than offsetting declines for ISM new orders and average workweek.

The preliminary Markit U.S. Manufacturing PMI Index showed the first contraction in almost 10 years in August, decreasing to 49.9 from July’s unrevised 50.4 figure, and versus expectations of a slight increase to 50.5. The preliminary Markit U.S. Services PMI Index showed growth fell more than expected but remained slightly in expansion territory for the key U.S. sector this month, decreasing to 50.9 from July’s 53.0 figure, and versus forecasts of a dip to 52.8. A reading of 50 for both indexes is the demarcation point between expansion and contraction.

Treasuries were lower in choppy trading, as the yield on the 2-year note increased 4 basis points to 1.61%, the yield on the 10-year note was up 3 bps at 1.61%, and the 30-year bond rate rose 5 bps to 2.10%.

Global growth concerns have ramped-up, trade tensions between the U.S. and China have escalated, and geopolitical uneasiness has intensified, while a host of global central banks have moved to more dovish stances to foster deeper dives into negative rates globally—notably in Europe.

The start of the Fed’s annual gathering in Jackson Hole, Wyoming garnered attention today, amid heightened expectations of further rate cuts this year and will culminate with tomorrow’s key speech from Chairman Jerome Powell on the heels of yesterday’s minutes that confirmed Committee members felt the rate cut following the meeting was a “recalibration”, as opposed to the start of an easing cycle.

Europe mostly lower, Asia mixed on data, yields and central bank stimulus uncertainty

European equities finished mostly lower, as the markets digested some mixed Eurozone economic data, while also grappling with festering U.S.-China trade uncertainty and the region’s ongoing political turmoil. Tomorrow’s key speech in Jackson Hole, Wyoming, by U.S. Fed Chief Jerome Powell was also eyed, along with the stabilization in bond yields after some volatility late yesterday in the U.S. as the markets reacted to the release of the minutes from the Fed’s July meeting that resulted in a rate cut but suggested it was a “recalibration”, as opposed to the start of an easing cycle.

The euro was lower versus the U.S. dollar and the British pound gained ground, while bond yields in the region moved mostly higher.

Stocks in Asia finished mixed, with the markets regaining some upward momentum yesterday but appearing cautious ahead of tomorrow’s key speech from Fed Chairman Jerome Powell and as economic data in Japan painted a mixed picture.

Stocks in Japan ticked higher, with the yen gaining some ground in late-day action, while the country’s manufacturing and services PMI indexes showed the former continued to contract but the latter’s growth accelerated for this month. Mainland Chinese equities also nudged higher, while those traded in Hong Kong fell. Australian securities rose, but markets in South Korea and India fell.

Market Insights 8/21/2019

U.S. stocks rallied, as global bond rates, which have fallen and intensified market uneasiness, stabilized, while some upbeat earnings out of the retail sector.

Treasury yields turned upward and the U.S. dollar nudged higher following the minutes, and as existing home sales rose and topped forecasts. Crude oil prices were mixed and gold lost modest ground.

The Markets…

The Dow Jones Industrial Average rose 240 points (0.9%) to 26,203

The S&P 500 Index increased 24 points (0.8%) to 2,924

The Nasdaq Composite advanced 72 points (0.9%) to 8,020

In moderately-light volume, 669 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil fell $0.45 to $55.68 per barrel and wholesale gasoline was $0.01 higher at $1.69 per gallon

The Bloomberg gold spot price declined $4.59 to $1,502.61 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 98.29

Existing home sales top forecasts, mortgage apps dip, Fed minutes released

Existing-home sales rose 2.5% month-over-month in July to an annual rate of 5.42 million units, compared to the Bloomberg expectation of a rise to 5.40 million units from June’s upwardly-revised 5.29 million rate. Sales of single-family homes were up m/m and versus year-ago levels, but purchases of condominiums and co-ops were roughly flat m/m and down y/y. The median existing-home price rose 4.3% from a year ago to $280,800, marking the 89th straight month of y/y gains. Unsold inventory came in at a 4.2-months pace at the current sales rate, down from 4.4 months a year ago.

Sales rose m/m in the Midwest, South and West, but were down in the Northeast. Sales were up slightly in the Midwest and South compared to last year, and were down in the Northeast and West.

National Association of Realtors Chief Economist Lawrence Yun said, “Falling mortgage rates are improving housing affordability and nudging buyers into the market,” but added that “supply of affordable housing is severely low.”

The MBA Mortgage Application Index dipped 0.9% last week, following the prior week’s 21.7% surge. The slight decline came as a 0.4% gain in the Refinance Index was more than offset by a 3.5% drop for the Purchase Index. The average 30-year mortgage rate decreased 3 basis points to 3.90%.

At 2:00 p.m. ET, the Fed released the minutes from its late-July monetary policy meeting, after which the central bank cut its benchmark interest rate but Fed Chairman Jerome Powell appeared to disappoint the markets by suggesting the move was a mid-cycle adjustment rather than the start of an easing campaign. The report indicated that most participants agreed that the quarter-point cut was “part of a re-calibration of the stance of policy, or mid-cycle adjustment” in response to changing conditions, and shouldn’t be viewed as an indication that there is a “pre-set course” for future cuts, an expression Chairman Jerome Powell used in a news conference following the July 30-31 meeting.

The Street had been pricing in a series of rate cuts, therefore Powell’s comments upped concerns that the Fed might not be as dovish with policy as anticipated, as global growth concerns have increased since the decision, trade tensions between the U.S. and China have escalated, and geopolitical uneasiness has intensified, while a host of global central banks have moved to more dovish stances to foster deeper dives into negative rates globally—notably in Europe.

The release precedes Friday’s key speech from Chairman Jerome Powell at the Central Bank’s annual gathering in Jackson Hole, Wyoming, which is poised to garner heightened scrutiny given the recent rise in global market volatility and rising expectations that the Fed will deliver more rate cuts this year.

Treasuries were lower, as the yield on the 2-year note increased 7 bps to 1.57%, the yield on the 10-year note gained 3 bps to 1.58%, while the 30-year bond rate nudged 2 bps higher to 2.07%.

Europe higher as bond yield pressure stabilizes, Asia mixed amid trade and Fed focus

European equities finished broadly higher, with bond yields on both sides of the pond stabilizing after the recent plunge had unnerved the global markets and exacerbated economic growth concerns. The markets await Friday’s key speech from U.S. Fed Chairman Jerome Powell, which will come amid elevated expectations of further rate cuts. Stocks shrugged off persisting U.K. Brexit concerns as a late-October deadline looms, as well as Italian political uncertainty after the country’s prime minister resigned. The euro was little changed versus the U.S. dollar but the British pound was lower. Bond yields were mostly higher, but Italian rates saw some pressure.

Stocks in Asia finished mixed, as the U.S. snapped a string of gains yesterday with pressure on global bond yields returning to cause global growth concerns to resurface, while U.S.-China trade uncertainty continued to fester. However, the markets were likely cautious ahead of Friday’s speech from Fed Chairman Jerome Powell in the U.S., which comes amid heightened expectations of further rate cuts.

Stocks in Japan decreased, even as the yen softened a bit, while South Korean securities increased slightly, despite August trade data showing the nation’s exports continued to fall. Mainland Chinese equities finished little changed and those traded in Hong Kong nudged higher, while shares in Australia and India dropped.

Market Insights 8/19/2019

U.S. equities finished higher, extending a winning streak to two days following a very volatile week, as a recovery in global bond yields, as well as optimism of further stimulus measures out of China and Germany, boosted investor sentiment.

Treasury yields were higher, along with the U.S. dollar amid an empty economic calendar that won’t heat up until later in the week and culminate with Friday’s speech from Fed Chairman Jerome Powell in Jackson Hole, Wyoming.

Crude oil prices were solidly higher, but gold pared a recent rally.

The Markets…

The Dow Jones Industrial Average rose 250 points (1.0%) to 26,136

The S&P 500 Index increased 35 points (1.2%) to 2,924

The Nasdaq Composite advanced 107 points (1.4%) to 8,003

In moderate volume, 766 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil moved $1.33 higher to $56.14 per barrel and wholesale gasoline was unchanged at $1.66 per gallon

The Bloomberg gold spot price lost $18.33 to $1,495.19 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 98.37

Treasury yields recover somewhat ahead of Fed gathering in Jackson Hole

Treasuries were lower, as the yields on the 2-year and the 10-year notes were up 7 basis points (bps) to 1.54% and 1.61%, respectively, while the 30-year bond rate gained 8 bps to 2.08%. Bond yields have recovered somewhat from a sharp drop that has come amid global growth concerns, U.S.-China trade uncertainty, and heightened geopolitical uneasiness, while global central banks are highly expected to deliver further accommodation.

Last week, market volatility continued to ramp up as the recent plunge in bonds rates that saw the yields on the 2-year and 10-year U.S. Treasury notes briefly invert and the 30-year bond rate fall below 2.0% for the first time in history, accompanied deeper dives into negative rates globally—notably in Europe—and amplified global market skittishness.

Europe sees widespread gains, Asia also begins week higher

European equities finished broadly higher, with global bond yields recovering a bit, while the markets seemed to get a boost from reports that Germany is preparing a fiscal stimulus plan to combat slowing economic growth, as well as reforms from China aimed at lowering borrowing costs. U.K. Brexit concerns continued to fester, while a relatively light economic calendar showed headline July Eurozone consumer price inflation came in a bit cooler than expected.

The euro ticked higher versus the U.S. dollar and the British pound lost ground, while bond yields advanced.

Stocks in Asia finished broadly higher to kick off the week, following Friday’s rally in the U.S. markets to cap off a wild weekly ride, while sentiment appeared to be underpinned by signs of stability in the global bond markets and reforms announced in China to lower borrowing costs.

Chinese stocks led the way, with those traded in both the mainland and in Hong Kong rallying. The yen continued to trim a recent advance, helping Japanese equities to move higher, while the nation reported a smaller-than-expected fall in July exports. Australian securities gained ground and South Korean listings rose, while markets in India ticked slightly higher.

Random Thoughts

Last week’s short-lived inversion of the 2-year and 10-year Treasury yield curve reminded investors that while the start of another recession is assured, its timing is not.

Indeed, the first yield curve inversion preceded all recessions since 1960 by an average of 11 months. What’s more, the rolling six-month price change for the S&P 500 gained an average 3.1% during inverted yield curve periods since 1976 and rose in price 61% of the time.

Plus, Action Economics’ GDP growth projections remain above 2% for the coming seven quarters and confirm S&P Capital IQ’s consensus EPS growth estimates that no earnings recession is on the horizon.

As a result, we project an upward trajectory for equity prices over the coming six-to-12 months. However, we see the same for volatility.