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Weekly Update – August 09, 2019

  • Stocks posted losses for the week, driven by eruptions of trade-related volatility. With last week’s news still fresh in memory, investors were confronted with escalating trade-war threats, disruptive White House tweets and a devaluation of China’s currency. Stocks suffered their worst day of the year on Monday as investors piled into bonds, sending prices skyward and yields earthward.
  • Stocks rallied after the yuan devaluation proved less severe than feared, but retrenched again after the White House suggested it might suspend upcoming trade talks with China. The 10-year U.S. Treasury yield declined from 1.775% to 1.736%. Economic worries sent crude oil futures down and gold futures up. The U.S. dollar held steady against a basket of major currencies.
  • With 90% of S&P 500 companies reporting second-quarter results, 73% have exceeded earnings per share (EPS) expectations, while 57% have beaten revenue expectations. As of August 9, 2019, Refinitiv estimated the S&P 500 index’s second-quarter earnings growth rate at 2.8% and its 12-month forward P/E ratio at 17.1. Carvana, Shake Shack and Vonage Holdings impressed this week, whereas Dean Foods, Disney and International Flavors disappointed.
  • The July ISM non-manufacturing index fell to 53.7, marking its lowest reading since August 2016. Business activity, new orders and prices were down. Final IHS Markit U.S. Services PMI rose to 53.0, up 1.5 versus June. Though business confidence registered fresh lows, business activity hit its fastest pace in three months.
  • German industrial production was much worse than expected in July, down 1.5% from June; year-to-date, production was down 5.3%. By contrast, industrial orders rose 2.5% in June, ahead of expectations.
  • Britain’s GDP contracted by 0.2% in the second quarter as Brexit uncertainty undermined business confidence. The drop was equivalent to an annualized decline of 0.8%, a sharp slowdown from the 2.0% increase seen in the first quarter. As a result, the pound fell to multiyear lows against the euro and U.S. dollar.
  • U.S. job openings in June were little changed at 7.35 million, compared to 7.38 million in May, according to the Job Openings and Labor Turnover Survey. Hiring fell by 58,000 jobs to 5.70 million.

CPWM Weekly Market Monitor (2019.08.09)

 

 

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