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Weekly Update – August 17, 2018

  • U.S. stocks gained through a choppy week. Trade tensions and Turkish lira weakness stoked fears of emerging market contagion, driving an early pullback. Then upbeat earnings and strong economic reports reassured investors, leading to a late U.S. rally. By contrast, markets finished down in Europe and were mixed in Asia. Oil and gold prices declined. The 10-year U.S. Treasury yield rose and fell in counterpoint to falling and rising investor sentiment, ending the week about where it started.
  • Advance estimates of U.S. retail sales for July totaled $507.5 billion, up 0.5% from June and 6.4% above July 2017. Sales for May through July 2018 were up 6.3% versus the same period a year ago.
  • The University of Michigan survey of consumer sentiment slipped to 95.3 in August, its lowest level since September. The decline was concentrated among households in the bottom third of the income distribution and reflected less favorable perceptions of market prices, particularly homes, household durables and vehicles.
  • U.S. industrial production rose by 0.1% in July vs. June. Manufacturing output rose but weakness in the mining and utility sectors held down the overall reading. Compared to a year ago, production was up 4.2%. U.S. productivity increased 2.9% in 2Q18, ahead of the 2.5% consensus and the fastest in three years. Unit labor costs unexpectedly declined 0.9%.
  • The Empire State manufacturing index rose to 25.6 in August, a 10-month high. (Any reading above zero indicates improving conditions.) Firms remained upbeat about the six-month outlook, but less so than earlier in the year. By contrast, the August Philadelphia Fed survey indicated slower manufacturing growth for that region. Still, most forward-looking indicators improved.
  • The National Association of Home Builders Housing Market Index (HMI) read 67 for August, down slightly from July. Builders continued to report strong demand for new housing but increasingly focused on affordability concerns.
  • The NFIB small business optimism index rose from 107.2 in June to 107.9 in July, marking the second highest level in the survey’s 45-year history.
  • China’s industrial output expanded by 0.48% in July compared to June. Japan’s industrial production decreased 1.8% month-over-month in June.

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