Volatility is the best term to describe stocks last week. Despite a Friday surge, stocks fell for the third consecutive week. Wednesday proved to be the most tumultuous day, as stocks experienced a major pullback. Long-term bond yields moved below that of the two-year note. This “inversion” has historical precedence as a warning of an impending recession (although that inversion seems to be reversing itself today). That, coupled with ramped-up trade war rhetoric between the United States and China, pushed stocks lower during the week. Year-to-date, the major indexes continue to run ahead of their 2018 year-end closing values, but the margin is narrowing. Still, the tech-heavy Nasdaq is almost 20% ahead of last year’s closing value, followed by the S&P 500, the Dow, the Russell 2000, and the Global Dow, which is still over 6.50% ahead of last year’s closing pace. Oil prices crept ahead last week, as did the price of gold (COMEX).
LAST WEEK’S ECONOMIC HEADLINES
- Consumer prices rose in July after advancing in June as well. Over the last 12 months ended in July, consumer prices have increased 1.8%. Overall, accelerating consumer prices may strengthen the argument against further interest rate cuts.
- The government deficit was $119.7 billion in July — significantly greater than the July 2018 deficit of $76.9 billion. Year-to-date, the deficit sits at $866.8 billion, about 27% higher than the deficit over the comparable period last year.
- Global inflation remained stagnant in July.
- Retail sales increased in July from the previous month and are 3.4% ahead of last July’s pace. Nonstore (online) retail sales jumped also last month, and are up 16.0% from July 2018.
- Industrial production declined 0.2% in July. Total industrial production was 0.5% higher in July than it was a year earlier.
- Building permits and home completions rose in July, advancing 8.4% and 7.2%, respectively. Housing starts lagged in July, falling 4.0% below their June totals. The ramp-up in home completions may explain the drop in housing starts. However, with the increase in building permits, housing starts should rebound in August.
EYE ON THE WEEK AHEAD