The benchmark indexes lost value for the second consecutive week, with the S&P 500, the Dow, and the Nasdaq sinking to levels not seen since August. Investors were hit with potentially worsening trade tensions between the United States and China, along with political uncertainty following the House’s impeachment inquiry. Small caps underperformed large caps as the Nasdaq and Russell 2000 each fell more than 2.0% last week. Bond prices dropped, sending the yield on 10-year Treasuries over 100 basis points below its 2018 closing mark.
LAST WEEK’S ECONOMIC HEADLINES
- The third and final estimate of the second-quarter gross domestic product showed the economy grew at an annual rate of 2.0%. The first-quarter GDP increased at a rate of 3.1%.
- Personal income rose 0.4% in August, and disposable (after-tax) income increased 0.5%. Consumer spending ratcheted back to a 0.1% increase last month after vaulting ahead 0.5% in July. Consumer prices, an indicator of inflationary trends, showed no movement in August after climbing 0.2% in July. Year-to-date, consumer prices are up 1.4% — well below the Fed’s 2.0% target rate.
- Sales of new single-family homes jumped 7.1% in August after falling almost 9.5% in July. New home sales are up 18.0% over the last 12 months.
- Orders for manufactured durable goods in August increased $0.5 billion, or 0.2%, to $250.7 billion, according to the Census Bureau. This increase, up three consecutive months, followed a 2.0% July increase.
- According to the advance report on international trade in goods, the trade deficit was $72.9 billion in August, up $0.4 billion from July.
EYE ON THE WEEK AHEAD
The first week of October focuses on manufacturing, international trade, and employment. Last month, purchasing managers reported a drop in export orders and lagging manufacturing growth in August. Their sentiment should be slightly more encouraging for September. On the labor front, 130,000 new jobs were added in August and the unemployment rate remained at 3.7%. Wages inched up 0.4% in August, and are up 3.2% for the last 12 months. A shrinking labor pool may be the impetus for employers to increase wages. So generally we look to continued solid U.S. economic results in the midst of political uncertainty in Washington DC and challenges abroad.