The Market Week in Review

After a highly volatile week, the U.S. stock market finished largely downward as concerns of a currency and trade war between the U.S. and China intensified.  Interest rates also continued to drop as the 10-year treasury yield fell by 12 basis points to 1.73%.  Over the past two weeks the 10-year treasury yield has fallen from 2.08% to 1.73%.  Meanwhile the spread between the 10-year treasury yield and the 2-year treasury yield was little changed as it dropped from 0.17% to 0.16%.  The price of gold jumped nearly 4.0% to $1,510 an ounce as investors flee to the safe haven commodity over U.S.-China trade tensions.  The U.S. dollar index (DXY), which typically moves inversely to the price of gold, fell from 98.10 to 97.56.  The price of crude oil fell by 1.45% to $54.39 a barrel amid Iran’s attempts to destabilize the oil market.

This Week's Economic Highlights

  • The ISM nonmanufacturing index, a measure of growth in the services sector of the economy, dropped from 55.1% in June to 53.7% in July.  (Any ready above 50% indicates improving conditions, while readings above 55% are considered exceptional.)  Although a reading of 53.7% is still relatively strong, the more recent downward trend of the index indicates that the service industry could be slowing down.
  • Initial unemployment claims fell by 8,000 to 209,000 for the week ending August 3rd.  However, the less volatile four-week average of initial claims only fell by 250 to 212,250.  Continuing unemployment claims, which lag initial claims by a week, fell by 15,000 to 1.68 million.
  • The producer price index (PPI), a measure of whole inflation, rose by 0.2% in July.  Meanwhile core PPI, which excludes the volatile food and energy prices, fell by 0.1%.  Over the past year both PPI and core PPI have grown at a rate of 1.7%.

Quote

“If you have to forecast interest rates, do it in the shower where nobody can hear you.”

      -Jim Grant

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