Stocks retreated across the globe for a second week; volatility in U.S. markets intensified as investors weighed the latest twist in U.S.–China trade relations and mixed economic data. For a time, worries eased about the economy and China trade; investors sold gold and U.S. government bonds, sending yields higher and boosting financials. The rally fizzled, however, after Bloomberg reported the Trump administration was considering limits on investment flows into China.
The two-to-ten-year segment of the U.S. yield curve remained inverted as investors bid up bond prices and yields fell: the ten-year U.S. Treasury declined to 1.68% at the close. Oil prices eased after reports of a partial ceasefire in Yemen. The U.S. dollar rose against a basket of major currencies.
Personal consumption expenditures, a key driver of the U.S. economy, rose 0.1% in August, dropping sharply from July’s 0.5% increase, even though income grew by 0.4%. At the same time, savings increased 8.1%, up from 7.8% in July.
The Conference Board reported that consumer confidence slipped to 125.1 in September, below August’s downwardly revised 134.2. The expectations and present situation components both declined.
The personal consumption expenditures price index, the Federal Reserve’s favorite inflation gauge, ticked up 0.03% versus July’s 0.21% increase. The August year-over-year inflation rate measured 1.44%, significantly below the Fed’s 2.00% target.
Eurozone composite PMI fell to 50.4, down from 51.9 in August. Germany accounted for much of the drag as it slipped into contraction. Japan manufacturing fell to a seven-month low.
U.S. Markit Flash Manufacturing PMI rose to 51.0 in September, its best reading in five months. Output hit a five-month high and new order growth improved, though export orders continued to weaken. Flash Services PMI was up 0.2 to 50.9, slightly in expansion mode.
August new home sales came in at 713,000, better than July’s 666,000. Sales were up 7.1% versus July and 18.0% year-over-year. July’s FHFA house price index outpaced June by 0.2%, rising to 0.4% and beating estimates for 0.2%. By contrast, MBA weekly mortgage applications were down 10.1% for the week ended September 20, the largest weekly drop since December 2016.