Market Update – August 5, 2019
The Week on Wall Street
Last week, the Federal Reserve cut interest rates for the first time in more than a decade, in line with Wall Street’s expectations. Ironically, stocks had their worst week of 2019.
The S&P 500 finished the week 3.10% lower. The Dow Jones Industrial Average and the Nasdaq Composite also posted weekly losses; the blue chips fell 2.60%, while the premier tech benchmark slumped 3.92%. International stocks tracked by MSCI’s EAFE index dipped 1.06%. [i],[ii],[iii]
Fed Cuts Benchmark Interest Rate
On Wednesday, the central bank reduced the federal funds rate by 0.25%. The latest Fed policy statement noted that “global developments” and “muted inflation” influenced the decision.
Addressing the media, Fed Chairman Jerome Powell described the cut as a “mid-cycle adjustment.” After that comment, Wednesday’s trading session turned volatile on the interpretation that the cut was a “one and done” move, instead of what might be the first in a series.[iv]
More Tariffs Planned
Shares also fell Thursday, after a White House tweet indicated that the U.S. would put a 10% tariff on another $300 billion of goods coming from China, effective September 1.
Practically speaking, this would mean a tariff on nearly all Chinese products arriving in America. So far, the announcement has not affected plans for trade delegates from both nations to continue negotiations in September.[v]
The Latest Hiring Data
Payrolls expanded with 164,000 net new jobs in July, according to the Department of Labor. The headline jobless rate stayed at 3.7%; it has now been under 4% for 17 months. The U-6 jobless rate, which counts both underemployed and unemployed Americans, dipped to 7.0%, a level unseen since December 2000.
Monthly job growth has averaged 140,000 over the past three months, compared to 187,000 in 2018.[vi]
THE WEEK AHEAD: KEY ECONOMIC DATA
Monday: The Institute for Supply Management releases its latest Non-Manufacturing Purchasing Managers Index, its monthly gauge of business activity in America’s service sector.
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[i]https://www.apnews.com/e15c18b9dbc44efab400d2214e2cb6f9
[ii]https://www.wsj.com/market-data
[iii]https://quotes.wsj.com/index/XX/990300/historical-prices
[iv]https://www.forbes.com/sites/jjkinahan/2019/07/31/feds-quarter-point-rate-cut-weak-global-growth-trade-tensions-muted-inflation-cited
[v]https://www.cnn.com/2019/08/01/investing/asian-market-latest-trade-war/index.html
[vi]https://www.cnn.com/2019/08/02/economy/july-jobs-report/index.html