September 26th – Weekly Update

  • U.S. equities experienced a flat week as investors focused on outcomes from the latest Federal Open Market Committee (FOMC) meeting and persistent global tensions with North Korea. Oil bumped up, gold lost some ground and the 10- year U.S. Treasury yield closed at approximately 2.24%.
  • North Korean tensions, which had settled down following its latest nuclear test, ratcheted somewhat higher again during the week after the country’s foreign minister threatened an H-bomb test in the Pacific. If carried out, this would mark a dramatic escalation in tensions, as previous tests have been conducted on North Korean soil. The threat came after state- media cited Kim Jong-un’s rhetorical broadside against President Trump; calling Trump “deranged” and saying that he would “pay dearly” for the threats he made at the United Nations General Assembly.
  • The FOMC announced that interest rates will be held steady, as had been widely expected, and also stated that the Fed’s balance-sheet runoff (as outlined in June) would commence next month. The statement was hardly changed since the prior meeting, though it included remarks suggesting that the recent hurricanes may disrupt the economy in the near term, but will likely have little lasting impact.
  • The Philadelphia Fed manufacturing index increased to 23.8 in September from 18.9 in August, ahead of the 17.1 consensus. The details of the report were also upbeat. New orders increased to 29.5 from 20.4 while shipments jumped to 37.8 from 29.4. However, the employment component fell to 6.6 from 10.1, declining for a third straight month (though the report did note it remained positive). The average workweek furthermore declined. Price pressures received some attention as prices paid increased to a six-month high. In the previous week, the Empire Fed manufacturing index also surprised to the upside for September.
  • Initial jobless claims fell 23K to 259K in the week-ended September 16, better than the 302K consensus. The better-than expected outcome reflected a 30K decline in Texas with the fading of the impact from Hurricane Harvey. Economists also noted that the effects of Hurricane Irma were smaller than expected. The four-week moving average rose 6K to 269K.

CPWM Weekly Market Monitor (2017.09.26)