September 18th – Weekly Update

  • Stocks staged an impressive rally as the Dow Jones Industrial Average and the S&P 500 posted fresh highs. Markets ignored shenanigans from North Korea, which fired another missile over Japan; however, U.K. stocks slipped after a bomb exploded on a London subway. Oil prices surged more than 4% on the week, whereas gold retreated. Prices of U.S. Treasurys fell; the 10-year yield rose to 2.20%.
  • U.S. consumer prices rebounded 0.4% in August, their biggest jump since January. The news lent support to the Fed view that softer inflation this year would prove transitory, and might reassure FOMC members as they meet next week to consider raising interest rates. On the other hand, inflation numbers in coming months are likely to be skewed by hurricane effects, making it difficult to distinguish underlying trends from temporary impacts.
    Americans’ average weekly earnings fell 0.6% in August, a sign that the economy still isn’t so vigorous. Hourly earnings rose but higher inflation more than offset the gain and the average workweek declined.
  • U.S. retail sales decreased by 0.2% in August, after July gains were revised down from 0.6% to 0.3% and after falling in June. The headline figure was dragged down by a drop in auto sales. Most categories were soft but gasoline sales rose 2.5%, reflecting a price surge as Texas refineries shut down ahead of Hurricane Harvey.
  • U.S. industrial production dropped 0.9% in August, its biggest monthly decline since May 2009. The Fed attributed most of the decline to Hurricane Harvey, which depressed oil drilling, petroleum refining and other industrial activity. Capacity utilization also fell to 76.1% in August; economists had expected 76.8%.
  • Eurozone composite PMI held steady at 55.7 in August, slightly below the secondquarter average and pointing to modestly easing third-quarter growth. July retail sales were down 0.3% from June, after rising steadily since January.
  • Chinese industrial production grew at an annual rate of 6% in August, a drop from 6.4% in July and further evidence that China’s economy may have peaked earlier in the year. Retail sales expanded 10.1% from a year ago, slowing from 10.4% in July.

CPWM Weekly Market Monitor (2017.09.18)