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Weekly Update

Market Summary

U.S. equities notched solid gains during a holiday-shortened trading week due to some renewed optimism around the U.S.-China trade conflict as officials from both administrations agreed to resume negotiations in October to take place in Washington. The news outweighed concerns of slowing U.S. economic growth driven by some disappointing manufacturing and labor market data. For the week, the Dow climbed 1.5%, while the S&P 500 and Nasdaq Composite each rose 1.8%. U.S. Treasury yields also started to rebound upward last week as the improved sentiment reduced demand for the safe haven asset of government bonds in favor of risk assets like equities.

Although the unemployment rate held firm at 3.7%, the August jobs report revealed a slowing pace of hiring in the U.S. as the number of non-farm payrolls added to the economy came in at just 130,000, which was below expectations for a 160,000 increase, and it was held up by a considerable increase in government workers ahead of the 2020 census. The weaker than expected employment data, along with an indication that the U.S. manufacturing sector has fallen into contraction for the first time in three years, increased investor expectations for further rate cuts at the upcoming Federal Reserve meeting.

Meanwhile, the trade war and global slowdown also continues to drag on China’s economy as exports fell -1.0% over the prior year in August compared to expectations for 2.0% growth and the prior month’s reading of 3.3% growth. Market participants will continue to monitor trade developments in the week ahead in addition to some important updates on the health of the U.S. consumer from updated retail sales data and a consumer sentiment survey.

Economic Highlights

  • Manufacturing: The U.S. ISM Manufacturing index dipped into contraction territory with a reading of 49.1, joining the rest of the global manufacturing sector that has broadly been in contraction for some time now. The decline was driven by falling new orders and factory hiring with the trade war remaining as the most heavily cited issue among respondents.
  • Service Sector: The U.S. non-manufacturing index showed greater strength in August rising to a three-month high of 56.4 versus July’s 53.7 reading. The report indicates that the service sector broadly remains on solid footing.

US Economy – The Week Ahead

Tuesday, 9/10/2019

  • Job Openings & Labor Turnover Survey – Consensus: 7,331K (-0.2% MoM), Prior Month: 7,348K (-0.5% MoM)
  • NFIB Small Business Optimism Index – Consensus: 103.1 (-1.5% MoM), Prior Month: 104.7 (1.4% MoM)

Wednesday, 9/11/2019

  • U.S. Producer Price Index (PPI) Year-Over-Year – Consensus Estimate: 1.8%, Prior Month: 1.7%

Thursday, 9/12/2019

  • Initial Jobless Claims – Consensus Estimate: 215,000 (-0.9% WoW), Prior Week: 217,000 (0.5% WoW)
  • U.S. Consumer Price Index (CPI) Year-Over-Year – Consensus Estimate: 1.8%, Prior Month: 1.8%

Friday, 9/13/2019

  • Retail Sales (Month-over-Month growth) – Consensus Estimate: 0.25%, Prior Month: 0.70%

  • University of Michigan Consumer Sentiment Survey (Preliminary) – Consensus Estimate: 90.4 (0.7% MoM), Prior Month: 89.8 (-8.7% MoM)

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