Apparently, a strong labor report, which included increasing wages, couldn’t keep stocks from plummeting last week. The United States’ threat to raise tariffs on an additional $267 billion in Chinese imports heightened trade war rhetoric and spooked some investors. The major stock indexes felt the heat, particularly the tech-heavy Nasdaq, which sank over 2.50%. The small caps and energy stocks of the Russell 2000 were also hit hard, as was the Global Dow. The S&P 500 dropped over 1.0%. Only the Dow managed to weather the storm, falling a comparatively slight 0.19%. The favorable employment report may be seen as a sign of rising interest rates as demand for long-term bonds increased, sending prices lower and yields up (bond prices move in the opposite direction from bond yields).
LAST WEEK’S ECONOMIC HEADLINES
- According to the latest report from the Bureau of Labor Statistics, 201,000 new jobs were added in August while the unemployment rate remained at 3.9%. Strong job gains and wage growth could lead to a rate hike when the Federal Open Market Committee meets at the end of this month.
- The purchasing managers index advanced in August over July and growth was noted in new orders, production, employment, supplier deliveries, and inventories.
- A similar survey from IHS Markit showed growth in the manufacturing sector as well.
- Economic activity in the non-manufacturing (services) sector grew in August for the 103rd consecutive month, according to the latest Non-Manufacturing ISM® Report On Business®.
- The Bureau of Economic Analysis reported that the goods and services trade deficit was $50.1 billion in July.
- In the week ended September 1, the advance figure for seasonally adjusted initial claims for unemployment insurance decreased by 10,000 from the previous week. This is the lowest level for initial claims since December 6, 1969.
EYE ON THE WEEK AHEAD