Trading in August was extremely volatile, dominated by the back-and-forth US-China trade war rhetoric, bond yields inverting and signaling possible recession, and general fears of a decline in global growth.
Daily Chart of the S&P 500 Index from August 1 to August 30, 2019
August 1
- Indices continued to fall sharply. As Fed Chair Jerome Powell’s comments indicated that the 25 basis point cut did not necessarily imply a continuing series of rate cuts in the future.
- Initial jobless claims increased by 8,000 to 215,000 in the week ended July 27, higher than economists expectations of 214,000 claims.
- The July PMI manufacturing index was expected to come in at 50.6 and came in at 50.4.
August 2
- US stocks extended their losses from yesterday’s session.
- Non-farm payrolls came in at 164,000, above the 151,000 consensus expectation.
- The unemployment came in at 3.7%, not far from the 3.6% that economists were anticipating.
- International trade balance for June came in soft at $-55.2 B, a slight improvement from the previous $055.3B.
August 5
- Stick indices fell sharply as China depreciated the yuan below the critical 7-per-1 level, further escalating the ongoing US-China trade war.
- China’s central bank claimed that the yuan declined due to the effects of trade protectionism and higher US tariffs placed on Chinese goods.
- The July Institute for Supply Management survey was anticipated to be at 55.5 but came in at 53.7.
- Analysts expect the Federal Reserve to ease credit conditions in the next few weeks, possibly placing a bottom to the market’s declines.
August 6
- Overnight, stock index futures fell when the US Treasury accused China of manipulating their currency–a comment that gave the impression of a further trade war escalation.
- But stocks recovered once the Peoples Bank of China claimed that it was not a matter of currency manipulation and that the yuan should not be expected to fall any further.
- The Job Openings and Labor Turnover Survey (JOLTS), which tracks monthly changes in job openings and offers rates on hiring and quits, came in at 7.348 million.
August 7
- A global collapse in bond yields spooked investors temporarily (as signs of slowing global growth), but US stocks nevertheless made a strong comeback.
- Low yields can also support growth in equity value and investors took that particular interpretation as a positive sign, causing the S&P 500 to rally shortly after the open.
- Such strong rallies are not atypical following such steep drops as US indices have experienced over the last few sessions.
August 8
- Global markets stabilized and US indices rallied as China posted its best export growth since March (imports remained weak however).
- Markets also rose when China fixed its currency at a level that was higher than expected–7.0039 to one US dollar.
- Initial claims for state unemployment benefits declined 8,000 to 209,000 lower than economist predictions that it would remain unchanged at 215,000.
August 9
- Indices appeared to be under pressure due to renewed political tensions in Italy and continued trade war concerns.
- The U.S. Producer Price Index increased 0.2% as most economists and analysts had expected.
August 12
- Stocks declined further on a variety of geopolitical issues–namely trade war fears.
- President Trump told reporters that despite the continuing trade talks with China, the US is not ready to make a deal.
- Hong Kong protests and political uncertainties in Italy added to the global growth concerns.
August 13
- Stocks had another wild rally today on trade headlines.
- The average range of the Dow this month (trading range) is at 473 points, twice it’s average trading range we’ve seen so far in 2019.
- Note that today, stocks moved in lockstep with bond yields, both reaching their highs at around 10:30 am ET.
- Stocks also appear to be beholden to central bank and trade-related news–a pattern we’ve seen pretty much all year.
August 14
- Today’s market was a “sea of red” as the Dow Jones fell -800 points, closing near the session lows.
- Indices are under pressure due to poor economic data from China and Germany.
- China’s economy weakened in July with industrial growth at a 17-year low.
- Germany’s GDP fell 0.1% compared with the previous quarter.
- An inverted yield curve in the US bond market is also beginning to flash signs of a potential recession.
August 15
- US indices fell slightly after China’s Ministry of Finance said President Trump’s intent to impose new tariffs violates a consensus between Trump and President Xi.
- Soon after, however, there was a conciliatory headline from China that reversed the negative sentiment–one that stated hopes that both nations can meet half-way on trade issues.
- Initial jobless claims came in at 220,000, higher than the median estimate of 213,000 new claims.
- Retail sales increased 0.7% in July, higher than economist expectations of a 0.3% increase.
- The Philadelphia Fed business index came in at 16.8, as compared with an anticipated 8.0.
August 16
- Stocks advanced on hopes of a Fed interest rate cut.
- China also announced overnight that it too was planning to roll out stimulus to address the global economic slowdown.
- Markets were also looking ahead to a possible interest rate cut from the European Central Bank.
- The Atlanta Federal Reserve Bank said its estimate for real GDP growth in the third quarter of 2019 is2.2%, as of August 15, which is up from 1.9% on August 8–adding to the market’s optimism.
August 19
- US indices extended their gains following last week’s China announcement of further stimulus.
- Additionally, Germany’s Finance Minister also hinted on a new $55.55 billion fiscal stimulus package.
- President Trump tweeted over the weekend that the US-China trade talks were going well and that Chinese officials may soon be visiting the White House to continue negotiations.
August 20
- Stocks slide slightly as investors awaited new clues on the crucial outlook on interest rates.
- Index futures were higher in the overnight session as investors welcomed signs of additional fiscal and monetary stimulus in the U.S. and abroad.
- There are reports that the White House has started looking at range of actions that could boost business and spending activity in the U.S. economy, including payroll tax cuts.
August 21
- Indices were supported by positive earnings and indications of fiscal and monetary stimulus in the US and overseas.
- July existing home sales report came in at 5.420 million, higher than expectations of 5.385 million.
August 22
- Stocks held relatively steady as investors await clues on how the Fed would respond to decreasing manufacturing activity and collapsing bond yields.
- Investors await Jerome Powell’s speech in the Jackson Hole Summit, expecting word on a rate cut in September.
August 23
- Indices plunge when President Trump ordered US manufacturers to leave China–a surprise that signaled an escalation of trade aggression between the two nations.
- The Dow plummeted by -623.34 points (2.4%), the S&P fell by 2.6%, and the Nasdaq dropped 3% by the end of the day.
August 26
- Stocks were lower in the overnight session but reversed when President Trump said that China was willing to strike a trade deal.
- Trump mentioned that Chinese officials called on Sunday, expressing a willingness to get back to the table to resume trade talks.
- S. durable goods orders increased 2.1% in July, higher than the anticipated figure of 1.2%.
- Durable goods fell 0.4%, missing analysts’ expectations of 0.1%.
August 27
- Stocks were not able to hold yesterday’s gains as bond yields slipped lower and the US-China trade standoff persists.
- Despite escalating trade tensions and stock market volatility, the consumer confidence report beat high-end expectations with a 135.1 showing versus a revised 135.8 in July.
August 28
- Indices drifted higher despite conflicting reports on the status of the US-China trade situation.
August 29
- Indices are higher due to renewed hopes for progress in the trade dispute between the U.S. and China.
- Both countries remain in communication over possible new talks next month.
- Initial jobless claims were up 4,000 to 215,000 in the week ended August 24.
- US economic growth was slightly weaker during tin Q2, but corporate profits strongly rebounded.
- The Commerce Department said Q2 GDP increased at a seasonally adjusted annual rate of 2.0%.
- Corporate profits advanced 4.8% from the prior quarter.
August 30
Stocks rallied (the Dow gaining 152 points) on optimistic news concerning US-China trade relations, but quickly reversed mid-day.
- Economic data this month has been pointing to a global growth slowdown, heightening concerns of a possible recession.
- The stock market’s reversal today ended a month of volatile trading.
Karl Montevirgen
Market Strategist | Halifax America