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Weekly Update

Market Summary

U.S. stocks ended a relatively positive week on a down note amid news that the White House plans to move forward with tariffs on $200 billion in Chinese goods to take effect on September 24th. For the week, the Dow, S&P 500, and Nasdaq all notched solid gains with returns of 0.9%, 1.2%, and 1.4%, respectively. The U.S. 10-year Treasury yield closed out last week at just under 3.0%, just to jump over that threshold in this week’s early trading, which may imply rising market expectations of inflation as a result of the announced tariffs.

Trade tensions with China are expected to escalate this week, as the Trump Administration unveiled the new round of tariffs on Monday that will bring the total amount of Chinese goods subject to tariffs to $250 billion or almost half of all goods imported from China. However, the $200 billion of Chinese goods currently under consideration will initially only be subject to a 10% tariff, increasing to 25% in 2019 if no agreement has been reached. In response, China has vowed to retaliate in-kind and is considering declining the White House’s offer of trade talks later this month, which would further decrease the likelihood of a near-term resolution.

Tropical Storm Florence, which was downgraded from a Category 1 hurricane on Friday morning, is finally moving on from North Carolina but will leave significant flood waters in its wake that will last another several days. The physical toll of the storm has sadly taken the lives of at least 17 people and left almost a million North Carolina residents without power. The economic toll is expected to almost rival the aftermath of last year’s Hurricane Harvey.

The coming week will be relatively quiet from an economic news perspective, but investors will be paying close attention to any further developments on the U.S. trade fronts with China and also with Canada, which remains unsettled after the U.S. reached a consensus on desired NAFTA amendments with Mexico several weeks ago.

Economic Highlights

  • Inflation: The U.S. Consumer Price Index (CPI) grew 0.2% in August (2.7% year-over-year), which was slightly below the consensus estimate of 2.8% year-over-year. However, the U.S. Job Openings and Labor Turnover survey revealed a tight labor market with 6.9 million job openings compared to 6.3 million unemployed civilians, which could exert upward pressure on wages and inflation.
  • Manufacturing: U.S. industrial production outgrew expectations last month, rising by 0.4%, and the July numbers were revised upward as well. However, it is believed that much of the unexpected strength has been the result of utility output, which tends to spike during hot weather periods in coastal areas like that experienced during August along the East Coast.

US Economy - The Week Ahead

Tuesday, 9/18/2018

No Data

Wednesday, 9/19/2018

Housing Starts – Consensus Estimate: 1,233K (5.6% MoM), Prior Month: 1,168K (-0.4% MoM)
Building Permits – Consensus Estimate: 1,310K (0.5% MoM), Prior Month: 1,303K (0.9% MoM)

Thursday, 9/20/2018

Initial Jobless Claims – Consensus Estimate: 210,000 (2.9% WoW), Prior Week: 204,000 (-4.2% WoW)
Existing Home Sales – Consensus Estimate: 5,365K (0.5% MoM), Prior Month: 5,340K (-0.7% MoM)
Leading Economic Index (Month-over-Month) – Consensus Estimate: +0.5%, Prior Month: +0.6%

Friday, 9/21/2018

No Data

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