Weekly Update - September 28, 2018
- Global stock indexes posted mixed results as a U.S. interest-rate increase and stalled trade talks tapped the brakes on gains. Despite impressive U.S. economic strength investors worried that tax-cut effects were waning, while higher rates and trade frictions with China and Canada might constrain growth.
- The Federal Reserve raised the Fed funds rate a quarter-point and signaled another hike in December, with more to come in 2019. U.S. Treasury yields, which recently reached seven-year highs, fell back, taking financial stocks with them. The 10-year yield rose to 3.12%, but ended at about 3.06%. The U.S. dollar gained slightly against a basket of currencies.
- Oil prices moved up on expectations of a global supply shortfall after U.S. sanctions against crude exporter Iran take effect in five weeks. Rising interest rates pressured gold prices lower.
- As expected, the Federal Reserve raised the target range of the Fed funds rate by 0.25% to 2.00-2.25%. Notably, the announcement omitted the longstanding characterization of monetary policy as “accommodative.” Fed Chair Jerome Powell cautioned investors not to think the omission signaled a shift in the path of interest rates.
- The Conference Board Consumer Confidence Index® increased to 138.4 in September, from 134.7 in August and near an 18-year high. Consumers’ views of current conditions remained extremely favorable, bolstered by robust economic and employment growth.
- The Commerce Department’s final revision left 2Q18 GDP growth unchanged at 4.2%, the fastest annual pace in nearly four years.
- The Chicago Fed National Activity Index (CFNAI) was unchanged at 0.18 in August. A positive reading indicates above-trend economic growth. The three-month moving average rose to 0.24, well below the 0.70 threshold associated with sustained, increasing inflation.
- The Richmond Fed manufacturing index rose five points to 29, its highest level on record. The strong Richmond reading contrasted with cooling seen in other regional Fed districts.
- The S&P CoreLogic Case-Shiller U.S. National Home Price index reported a 6.0% annual gain in July, down from 6.2% in June. Sales of existing single-family homes have dropped each month for the last six months. Housing affordability has worsened substantially since the start of the year.