The U.S. stock market ended the week mostly lower after the Chinese trade delegation cancels their trip to visit U.S. farms, signaling a lack of progress on trade negotiations. Interest rates fell due to a rate cut by the federal reserve, with the 10-year treasury yield dropping from 1.90% to 1.75%. Despite the federal reserve rate cut, the price of gold ended the week 1.9% higher amid the news of the Chinese trade delegation and a drone strike on Saudi Arabian oil facilities. The attack on Saudi Arabian oil facilities also sent the price of crude oil up 5.7% to $58.09 a barrel as the attack deteriorates the abundant supply of the commodity.
This Week's Economic Highlights
U.S. industrial production (output) jumped by a much needed 0.6% in August, its largest monthly increase in a year. July’s output was also revised upward from a 0.2% drop to a 0.1% drop. The jump in August’s out came mostly from an increase in mining in manufacturing output. Despite the large increase in output, U.S. manufacturing still remains in a technical recession due to a weakening global economy and headwinds from the U.S. and China trade war.
Housing starts soared 12% in August to a seasonally-adjusted annualized rate of 1.36 million. Meanwhile, housing permits (a leading indicator of housing starts) rose by 8.0% to a seasonally-adjusted annualized rate of 1.42 million, its strongest pace since 2007. Much of the strong rise in housing market data can be attributed to falling mortgage rates, yet home builders are still concerned on the potential impact the trade war may have on potential buyers’ confidence.
The Federal Reserve Open Market Committee (FOMC) lowered the Feds Fund Rate by an expected quarter of a percent to a range between 1.75% and 2.00%. This marks the second rate cut in the past two months, with the first rate cut being the first since 2007. Fed Chairman, Jerome Powell said the he sees a favorable economic outlook, but “if the economy does turn down, then a more extensive sequence od rate cuts could be appropriate”.
After falling sharply the week before, initial unemployment claims rose by a slim 2,000 to a total of 208,000 for the week ending September 14th. However, the more stable four-week average of initial claims fell by 750 to 212,250.
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