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Weekly Update – September 21, 2018

  • Stock markets across the globe advanced as investors set aside international trade concerns and bet the U.S. economy would keep the rally afloat. European and Asian bourses all gained; Chinese stocks had their best week since 2016. The Dow Jones Industrial Average and the S&P 500 index set new highs, pushed by gains in trade-sensitive manufacturers, after tariffs announced by the United States and China appeared less severe than expected. The indexes further benefited as rising yields boosted bank stocks. By contrast, the Nasdaq index finished the week flat.
  • With the U.S. economy strengthening and inflation looking benign, most investors thought the Federal Reserve would raise interest rates at next week’s policy meeting. As a result, U.S. Treasury prices declined and yields rose steadily. The 10-year U.S. Treasury yield crested at 3.09% but closed at 3.06%.
  • The U.S. dollar, as measured by the WSJ Dollar Index, declined against a basket of currencies; several analysts said this reflected renewed confidence that trade quarrels would not stymie global economic growth. Commodities gained on the week. U.S. crude oil rose from $69/barrel to about $71. Gold prices jumped from $1199/oz. to $1213 before easing to $1203.
  • Initial jobless claims — a proxy for U.S. layoffs — fell to 201,000 this week, their lowest level since 1969. The four-week moving average of continuing claims reached its lowest point since late 1973.
  • Regional economic activity gauges showed mixed readings for September vs. August. The Empire State Manufacturing Survey pointed to slower growth, falling to 19.0 from 25.6, though respondents remained optimistic about the six-month outlook. By contrast, the Philadelphia Fed Index jumped to 22.9 from 11.9.
  • The housing market’s ongoing affordability challenges showed in recent stats. The NAHB Housing Market Index, a gauge of builder confidence, was unchanged at 67 from August to September. August housing starts beat expectations, but existing home sales were flat and building permits declined.
  • The eurozone economy continued gradually to slow. The IHS Markit Composite Purchasing Managers Index fell to 54.2 in September from 54.5 in August. Most of the slowdown occurred in the manufacturing sector, where growth of export orders stalled.

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