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Market Summary

Negative readings on both the U.S. manufacturing and service sectors pushed U.S. equities broadly to a third consecutive week of losses, but stocks finished the week on a slightly more optimistic note following a relatively solid employment report. For the week, the S&P 500 and Dow lost -0.3% and -0.9%, respectively, while the Nasdaq Composite eked out a 0.5% gain. Meanwhile, U.S. Treasury yields plunged across the curve with 10-year yield falling from 1.68% to 1.51% during the week as the economic growth picture cooled notably but the solid jobs report helped keep recessionary fears at bay.

The September reading of the monthly manufacturing survey compiled by the Institute for Supply Management, indicated that the U.S. manufacturing sector has fallen further into contraction, hitting its lowest level in the past 10 years at 47.8 and badly missing the consensus forecast of 50.4. Soon after, the non-manufacturing report compounded the disappointment, as the index slid to a 3-year low of 52.6, which implies that growth in the broader service sector is slowing but remains in positive expansion territory for the time being.

Markets perked up on Friday when the Bureau of Labor Statistics announced that the nation’s unemployment rate has fallen to a 50-year low of just 3.5%. The economy added 136,000 jobs in September, which shows some slowing in momentum from the average monthly job growth of 161,000 so far in 2019 and last year’s pace of 233,000 jobs per month, but the slowing is natural given the tightening job market.

In the week ahead, U.S. and Chinese officials will begin high-level trade discussions on Thursday. China’s Commerce Ministry has stated that the country is ready to do a deal on parts of negotiations that both sides have come to agreement on but also that intellectual property changes are off the table, while President Trump has been pushing for a complete deal or no deal at all. The Federal Reserve will also be in the spotlight as September’s FOMC meeting minutes are released on Wednesday and Chairman Jerome Powell is due to give a speech on monetary policy at a Fed Listens Event in Kansas City.

Economic Highlights

  • Wages: Average hourly earnings disappointed slightly in September as they were flat against the previous month and rose 2.9% year-over year, which was down from the prior month’s growth rate and consensus estimate of 3.2%.
  • Oil: Oil prices dipped -5.7% last week as Saudi Arabia announced that it has brought oil production back to normal levels following the attacks several weeks ago and global economic growth expectations receded further, which could temper demand for oil.

US Economy – The Week Ahead

Tuesday, 10/8/2019

  • U.S. Producer Price Index (PPI) Year-Over-Year – Consensus Estimate: 1.8%, Prior Month: 1.8%
  • NFIB Small Business Optimism Index – Consensus: 104.1 (1.0% MoM), Prior Month: 103.1 (-1.5% MoM)

Wednesday, 10/9/2019

  • Job Openings & Labor Turnover Survey – Consensus: 7,215K (-0.03% MoM), Prior Month: 7,217K (-0.4% MoM)
  • Federal Open Market Committee (FOMC) September meeting minutes released

Thursday, 10/10/2019

  • Initial Jobless Claims – Consensus Estimate: 215,000 (-1.8% WoW), Prior Week: 219,000 (1.9% WoW)
  • U.S. Consumer Price Index (CPI) Year-Over-Year – Consensus Estimate: 1.8%, Prior Month: 1.7%

Friday, 10/11/2019

  • University of Michigan Consumer Sentiment Survey (Preliminary) – Consensus Estimate: 92.0 (-1.3% MoM), Prior Month: 93.2 (3.8% MoM)

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