August 21st – Weekly Update

  • U.S. equities were down for the week with S&P 500, Dow Jones and Nasdaq all losing ground. Oil and gold both finished the period higher and the 10-year U.S. Treasury yield closed at approximately 2.19%.
  • The deteriorating relationship between the White House and corporate America made headlines leading to some concern about what this could mean for President Trump’s pro-business agenda. Tax reform negotiations are not expected to get any easier amid the increased bipartisan divide. President Trump announced that he is dissolving his CEO advisory panels after a number of executives recently stepped down.
  • The release of the July Federal Open Market Committee (FOMC) minutes support the expectation of a September balance sheet normalization announcement. The minutes also reiterated the Federal Reserve’s expectations that the balance sheet runoff will only result in a modest reduction in policy accommodation and noted a debate over whether current inflation expectations are well anchored.
  • Oil rallied in the wake of news that Venezuela’s controversial new Constituent Assembly decreed that it, and not the country’s Congress, has the power to pass laws. Critics have argued that the body is a method for President Nicolas Maduro to bypass or even eliminate the country’s National Assembly, which is currently led by opposition politicians. There has been some resistance to the U.S. applying sanctions to the country’s critical oil industry, with some legislators warning that the move could drive Venezuela to seek closer ties to China or Russia.
  • Initial jobless claims fell to 232K in the week-ended August 12, down from 244K in the prior week, but better than the 240K consensus. The less volatile four-week moving average was little changed at 240.5K.
  • Housing starts and permits missed expectations. Housing starts fell 4.8% month-to-month to a 1.16M seasonally adjusted annual rate (SAAR) in July, below the 1.22M consensus. Building permits fell 4.1% to a 1.22M saar, worse than the 1.25M consensus. Multifamily homes fell 15.3%, while building permits dropped 11.2%.
  • Retail sales, the Empire manufacturing index and homebuilder sentiment all surprised to the upside during the period, helping dampen some concern stemming from last week’s disappointing inflation data.

CPWM Weekly Market Monitor (2017.08.21)