Clarksville, TN – A sharp drop in China’s stock market rattled investors’ nerves around the world. The Dow Jones Industrial Average fell by more than 1,000 points at the open on Monday, regrouped, and then fell again, leaving the benchmark index down 588.
Volatility continued throughout the week, but investors were encouraged by China’s efforts to shore up its stock market and support economic growth. Oil prices fell further, but picked up by the end of the week. The market volatility has left investors struggling to figure out where share prices should be. Volatility is expected to decrease in coming days, but may continue for a while.
The economic data were mixed. Real GDP rose at a 3.7% annual rate in the government’s second estimate (versus 2.3% in the advance estimate), but that followed a 0.6% pace in 1Q15 (for a 2.2% average in the first half). Private Domestic Final Sales rose at a 3.3% annual rate (vs. +2.5% in the advance estimate and 2.0% in 1Q15).
Personal income and spending figures for July were close to expectations, with inflation continuing to trend at a low level (excluding food & energy, the PCE Price Index rose 1.2% y/y, versus the Fed’s goal of 2%.
Next week, fresh August figures will begin to roll in. The data ought to be more important for the markets, assuming worries about China begin to lessen. The ISM surveys have some potential to surprise.
However, the focus will be on Friday’s employment numbers. There is a fairly large amount of statistical noise in the monthly payroll estimate. The three-month average reduces that uncertainty, but the markets will still concentrate on the headline figure. Payrolls are expected to have expanded at a moderately strong pace. The unemployment rate is likely to edge a bit lower.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.545||1.658|
|Dollars per Euro||1.129||1.318|
|Japanese Yen per Dollar||120.210||103.930|
|Canadian Dollars per Dollar||1.321||1.090|
|Mexican Peso per Dollar||16.933||13.074|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||3.43||3.54|
Treasury Yield Curve – 08/28/2015
As of close of business 8/27/2015
|Aug 31st||—||Chicago PMI (August)|
|Sept 1st||—||ISM Manufacturing Index (August)
Motor Vehicle Sales (August)
|Sept 2nd||—||ADP Payroll Estimate (August)
Fed Beige Book
|Sept 3rd||—||ECB Policy Decision
Jobless Claims (week ending 8/29)
Trade Balance (July)
ISM Non-Manufacturing Index (August)
|Sept 4th||—||Employment Report (August)|
|Sept 7th||—||Labor Day (markets closed)|
|Sept 11th||—||Producer Price Index (August)|
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business August 27th, 2015.