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Weekly Update

Market Summary

The stock market roller coaster continued this past week as escalating trade tensions sent the S&P 500 swinging over 1.3% daily on average throughout the week. Investors rapidly bounced back and forth between riskier assets and safe havens, pushing the 10-year U.S. Treasury yield down to 1.73% from 1.86% in the week prior. Despite the volatility, all three major U.S. equity indices closed down less than 1% lower, with the S&P 500 losing -0.7% and the Dow Jones and Nasdaq Composite dropping -0.3% and -1.0%, respectively. The indices ended the week on a down note when the White House announced that it was not going to make a deal with China for now and that trade negotiations could even break off, exacerbating fears that the U.S.-China trade standoff would aggravate the global economic slowdown.

The flight to safe haven U.S. government bonds from equities has extended into this week’s early trading following disappointing economic data out of China and escalating civil unrest in Hong Kong that could exacerbate the slowdown. On Monday, Hong Kong's airport was forced to ground all flights due to anti-government protests. This follows over 200 flights being canceled last week due to the citywide strike that is now in its 11th week.

In the wake of last week’s weakening of the Chinese currency, there have been many reports highlighting concerns about U.S. dollar strength and the headwinds that it poses to the American economy. According to FactSet, the value of the U.S. dollar against a basket of foreign currencies is up about 25% over the past decade. Rising dollar strength tends to erode the earnings of U.S. multinationals as they convert profits generated overseas back into U.S. dollars, and it makes U.S. goods more expensive for international consumers, thereby reducing demand. However, the strength of the U.S. consumer has offset some of the weakness in international demand.

In the week ahead, market participants will get some important updates on the health of the U.S. consumer based on the upcoming monthly retail sales report and consumer confidence report in addition to the second quarter earnings announcements from some notable retail companies.

Economic Highlights

Gold: Rising demand drove the spot price of gold up 3.5% this past week along with an increase in the prices of other precious metals due to higher equity volatility as they are viewed by some investors as safe haven assets.


Service Sector: The Institute for Supply Management’s (ISM) non-manufacturing index fell to a three-year low in July of 53.7, which was below expectations of 55.5 and the prior month’s reading of 55.1. The reading indicates that the weakness in the manufacturing sector is starting to spill over into the much larger service sector, which has held up well until recently.

US Economy – The Week Ahead

Tuesday, 8/13/2019

  • U.S. Consumer Price Index (CPI) Year-Over-Year – Consensus Estimate: 1.7%, Prior Month: 1.6%
  • NFIB Small Business Optimism Index – Consensus: 104.9 (1.5% MoM), Prior Month: 103.3 (-1.6% MoM)

Wednesday, 8/14/2019

  • No Data

Thursday, 8/15/2019

  • Initial Jobless Claims – Consensus Estimate: 215,000 (0% WoW), Prior Week: 209,000 (-3.7% WoW)
  • Retail Sales (Month-over-Month) – Consensus Estimate: 0.3%, Prior Month: 0.4%
  • Labor Productivity Growth Quarter-over-Quarter for 2Q19 – Consensus Estimate: 1.0%, Prior Month: 3.4%
  • Industrial Production (Month-over-Month) – Consensus Estimate: 0.2%, Prior Month: 0%

Friday, 8/16/2019

  • Housing Starts – Consensus Estimate: 1,259K (0.5% MoM), Prior Month: 1,253K (-0.95% MoM)

  • University of Michigan Consumer Sentiment Survey (Preliminary) – Consensus Estimate: 97.0 (-1.4% MoM), Prior Month: 98.4 (0.2% MoM)

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