Rising interest rates and continued trade concerns put a damper on stocks last week. While not unanticipated, the Fed raised the federal funds target rate 25 basis points and intimated that another hike is likely for December. On the trade front, the United States imposed tariffs of 10% on $200 billion worth of Chinese goods, prompting the Chinese government to threaten tariffs on $60 billion of U.S. imports. As was the case the prior week, the major benchmark indexes ended last week with mixed returns. The tech-heavy Nasdaq posted solid gains while the remaining indexes suffered losses, with the Dow 30 and Global Dow each falling more than 1.0%. The price of crude oil (WTI) continued to surge while the price of gold (COMEX) fell.
LAST WEEK’S ECONOMIC HEADLINES
- For the third time this year, the Fed raised interest rates while projecting another rate hike in December, highlighting ongoing strengthening in the economy, labor, household spending, and business fixed investment. The Committee views the current interest rate policy as closing in on the level estimated to sustain full employment and the Fed’s 2.0% inflation target, instead of stimulating the economy.
- The third and final estimate of the second-quarter gross domestic product came in at a strong 4.2% annualized rate of growth — its fastest pace in almost four years.
- Consumer income and spending continue to surge, while prices for goods and services remain stagnant, according to the latest report from the Bureau of Economic Analysis.
- Sales of new homes picked up the pace in August after lagging for several months.
New orders for durable goods (mainly civilian aircraft) expanded at a rate of 4.5% in August.
- The international trade in goods deficit expanded in August over July.
- According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended September 15. This is the lowest level for insured unemployment since November 10, 1973.
EYE ON THE WEEK AHEAD