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Weekly Update

Market Summary

U.S. equities were propelled higher this past week by a reprieve in trade tensions from the U.S.-China trade truce at the G20 summit but finished slightly below record highs following Friday’s solid employment report that reduced expectations for an interest rate cut at July’s Federal Reserve meeting. For the week, the Dow Jones and S&P 500 climbed 1.3% and 1.7%, respectively, while the Nasdaq Composite jumped up almost 2.0%. U.S. Treasury yields were also lifted higher by the jobs report, with the 10-year yield ending the week at 2.04%.

The trade meeting between President Trump and Chinese President Xi on the sidelines of the G20 summit helped to ease concerns of further escalation by bringing both nations back to the negotiating table, but both sides remain at a stalemate on key issues such as intellectual property protection and forced technology transfer. As a result of the resumption of negotiations, the U.S. will not impose further tariffs on Chinese imports for the time being and will partially lift export restrictions to Chinese telecom conglomerate Huawei.

Friday’s employment report from the U.S. Bureau of Labor Statistics noted that the economy added 224,000 jobs in June, well above expectations for 160,000 job additions, while the unemployment rate ticked up slightly to 3.7% and the rate of wage growth remained at 3.1% over the prior year. The results support the assertion that the U.S. consumer remains on healthy footing, but they were also seen as being less supportive of looser monetary policy. Although the market continues to price in a rate cut with near certainty at this month’s Fed meeting, the possibility of the cut being greater than 0.25% dropped from 29% before the jobs report to just 7% currently, according to the CME FedWatch Tool.

In the week ahead, all eyes will be on Fed Chairman Jerome Powell’s Congressional Testimony and the release of June’s FOMC meeting minutes on Wednesday as well as updated inflation readings later in the week, as investors try to get a better picture of the path of monetary policy. Additionally, the U.S. will send a high-level trade delegation to visit India to discuss the recent implementation of tariffs by India on select U.S. goods.

Economic Highlights

Manufacturing: The monthly manufacturing index from the Institute for Supply Management (ISM) came in slightly better than anticipated but still declined 0.4 in June to 51.7, which indicates that the manufacturing sector remains in expansion mode but that growth continues to cool.

Service Sector: The ISM non-manufacturing index came in slightly below expectations for June at 55.1, compared to the consensus forecast of 55.9 and May’s reading of 56.9, as new orders growth slowed notably.

US Economy – The Week Ahead

Tuesday, 7/9/2019

  • NFIB Small Business Optimism Index – Consensus: 105.0 (0% MoM), Prior Month: 105.0 (1.5% MoM)
  • Job Openings & Labor Turnover Survey – Consensus: 7,440K (-0.1% MoM), Prior Month: 7,449K (-0.3% MoM)

Wednesday, 7/10/2019

  • Federal Open Market Committee (FOMC) June meeting minutes released

Thursday, 7/11/2019

  • U.S. Consumer Price Index (CPI) Year-Over-Year – Consensus Estimate: 1.6%, Prior Month: 1.8%
  • Initial Jobless Claims – Consensus Estimate: 221,000 (0% WoW), Prior Week: 221,000 (-3.5% WoW)

Friday, 7/12/2019

  • U.S. Producer Price Index (PPI) Year-Over-Year – Consensus Estimate: 1.6%, Prior Month: 1.8%

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