Stocks were down on Monday as financial shares across the globe suffered the largest decline of a single sector. This weakness in the financial stocks comes in part as a result of the Fed’s decision last week to keep interest rates unchanged until at least November, and concern over the impact of a settlement between a major European bank and the U.S. Justice Department. For others, the uncertainty of the presidential election may be beginning to weigh on investors’ minds, due to the first presidential debate that was held on Monday.U.S. stock futures began losing ground on Sunday as markets in Europe and Asia declined, leading the major market averages to a lower price at the opening bell. Not even higher oil prices on Monday could invigorate the stocks market as U.S. crude oil gained 3.3 percent to $45.93 per barrel. Though most of the day’s losses occurred in the first thirty minutes of trading, prices spent most of the day at the bottom of the range closing near their lowest prices of the day, with the Standard and Poor’s 500 down 0.86 percent and the Nasdaq Composite off 0.91 percent.This week is expected to be relatively light on economic news, but throughout the week eleven members of the Federal Reserve are scheduled to speak to include Federal Reserve President Janet Yellen. This barrage of messages from the Federal Reserve should keep investors on their toes.
Laif E. Meidell, CMT
We hope that you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster
Weekly Economic Update
FED WAITS TO RAISE INTEREST RATES
Federal Reserve officials decided against a rate hike last week, but two details in the central bank’s latest policy statement suggested an upward move was near. One, the Federal Open Market Committee voted 7-3 against raising the federal funds rate – an unusually close margin. Two, the Fed’s new dot-plot forecast showed consensus for a rate increase before the end of 2016. “Our decision [to wait] does not reflect a lack of confidence in the economy,” Fed chair Janet Yellen told the media after the announcement. “We’re generally pleased with how the U.S. economy is doing.”1
FEWER HOUSING STARTS, LESS HOMEBUYING
August saw existing home sales dip 0.9%; as the National Association of Realtors delivered that news, it also revised its July sales calculation to a decline of 3.4%. A Census Bureau report showed housing starts falling 5.8% last month, and building permits decreasing 0.4% following an 0.8% retreat in July.2OIL GAINS FOR WEEK, EVEN WITH 4% FRIDAY FALL
WTI crude settled Friday at $44.48 on the NYMEX, even after the price slipped 4% in one trading day. The worst daily drop for the commodity since July 13 did not stop crude from posting a 2% weekly gain.3
TURBULENCE, BUT ALSO AN ADVANCE
Stocks pushed through volatility and gained ground last week. Across five trading days, the Dow Jones Industrial Average rose 0.76%; the Nasdaq Composite, 1.17%; and the S&P 500, 1.19%. The three indices closed, as follows, Friday: Dow, 18,261.45; Nasdaq, 5,305.75; S&P, 2,164.69. Incidentally, the Dow Jones Utility Average ended the week at +20.15% YTD.4
Monday brings August new home sales data, earnings from Carnival and Thor Industries, and the first presidential debate. The Conference Board’s September consumer confidence index and the July Case-Shiller home price index arrive Tuesday, plus quarterly results from Cintas and Nike. On Wednesday, Fed chair Janet Yellen testifies on bank supervision and regulation before the House Financial Services Committee, the latest durable goods orders report appears, and Paychex and Pier 1 present quarterly results. Thursday, Janet Yellen speaks at a Kansas City Fed conference, NAR issues its August pending home sales report, the final number on Q2 GDP comes out of Washington, and new initial claims figures appear, along with earnings from ConAgra Foods, Costco, and PepsiCo. August personal spending data and the final September consumer sentiment index from the University of Michigan take the spotlight Friday.