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
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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%.
- 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.
- Indices drifted higher despite conflicting reports on the status of the US-China trade situation.
- 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.
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.
Market Strategist | Halifax America