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Weekly Update – August 10, 2018

  • Stocks took a leg down for the week. With 2Q18 earnings season nearly over, there were few counter-narratives to tariff issues and the shadow Turkish financial instability cast over world markets. As the Turkish lira plunged vs. the U.S. dollar, fears of contagion spreading to other emerging markets pushed investors into so-called “safe havens” such as the U.S. Treasury market, driving the 10-year Treasury yield from 2.94% to 2.86%. Oil prices fell and gold prices ended the week flat.
  • With 91% of S&P 500 companies reporting second-quarter results, 79% have exceeded earnings per share expectations, while 72% have beaten sales expectations. As of August 10, 2018, FactSet estimated the S&P 500 index’s second-quarter earnings growth rate at 24.6% and its 12-month forward P/E ratio at 16.6, above the five- and ten-year averages of 16.2 and 14.4, respectively. Cooper Tire & Rubber, SeaWorld and Tyson Foods impressed this week, whereas Disney, Hostess Brands and Zillow disappointed.
  • The Labor Department reported that the consumer price index (CPI) rose 0.2% in July, in line with expectations. Rising shelter costs offset declines in energy prices. The year-over-year CPI increase was 2.9%, unchanged from June. The YoY rate of core inflation — excluding volatile gasoline and food prices — rose to 2.4%, the highest point since September 2008.
  • The Job Openings and Labor Turnover Survey (JOLTS) showed the job openings rate in June was unchanged at 4.3%. The hiring rate declined to 3.8% from 3.9% in May and the quits rate, the number of Americans voluntarily quitting their jobs, held at 2.3% for a fourth straight month.
  • The Sentix index of eurozone investor sentiment rose to 14.7 in August, from 12.1 in July, as worries eased over global trade. Sentix conducted the survey after President Trump and EU Commission Chief Jean-Claude Juncker agreed to a ceasefire in the transatlantic trade battle.
  • A day after the United States said it would impose tariffs on another $16 billion of Chinese goods, China responded with 25% tariffs on $16 billion of U.S. imports, including large passenger cars, motorcycles, coal and recyclables.

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