Short On Time… Executive Summary
There is lots of talk about a government shutdown Tuesday and it rattled things a little last week. Let me be the first to tell you this is a non-event for the market. Put it out of your mind as far as the market is concerned. Just tuck it away in your mind for the next election. If business ran the way government does no business would last. Enough on that subject. See the charts below for proof the market doesn’t care about a government shutdown.
As Paul Harvey would say, now on to the rest of the story. The market went down 3 days in a row last week, and all the talking heads are calling it a top and the end is near. Well, once again, they are overreacting. The market is trading on news, and we still have a few weeks before earnings season picks back up. Once we get into earnings, I suspect we will see corporate America is doing just fine. Lots of Fed speak this week. Don’t pay attention to what they say, pay attention to what they do.
The Week On Wall Street
Stocks fell last week, buffeted by concerns about stock price valuations and a possible government shutdown. The Standard & Poor’s 500 Index declined 0.31 percent, while the Nasdaq Composite Index lost 0.65 percent. The Dow Jones Industrial Average slipped 0.15 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 0.34 percent.
Stocks Under Pressure
The S&P 500 and the small-cap index Russell 2000 hit all-time intraday highs on Tuesday before trending lower. The decline turned into a three-day retreat for stocks.
Adding to the selling pressure was Federal Reserve Chair Powell, who made cautious comments on stock price valuations on Tuesday. Investors were also watching a possible government shutdown as Congressional budget deliberations appeared to stall. It was the first time in six months that all three averages (Dow, S&P 500, and Nasdaq) declined over three consecutive sessions. Stocks rebounded Friday after the Personal Consumption & Expenditures (PCE) Index—the Fed's preferred inflation measure—was in line with expectations. The news appeared to reassure investors that the Fed would move ahead with its “penciled-in" rate adjustments for the remainder of this year.
Economic Snapshot
A flurry of updated economic data hit last week. Here are the key takeaways:
Overall, the indicators suggested a strong economy. The final estimate of Q2 gross domestic product was 3.8 percent, stronger than previous reports. Durable goods orders rebounded in August, driven by a surge in aircraft orders. And weekly jobless claims fell. The fact that the PCE was in line with estimates—core inflation of 2.9 percent year over year—was welcome news for investors. The report seemed to support Fed Chair Powell’s position, who on Tuesday suggested that weakness in the labor market outweighed concerns about stubborn inflation.
This Week: Key Economic Data
Monday: Pending Home Sales. Fed Officials speak: Christopher Waller (Fed governor), Beth Hammack (Cleveland Fed President), John Williams (New York Fed President), Alberto Musalem (St. Louis Fed President), and Raphael Bostic (Atlanta Fed President).
Tuesday: S&P Case-Shiller Home Price Index. Job Openings. 1-Year Treasury Bill Auction. Consumer Confidence. Fed Officials speak: Philip Jefferson (Fed Vice Chair), Austan Goolsbee (Chicago Fed President), Lorie Logan (Dallas Fed President).
Wednesday: ADP Employment Report. Construction Spending. ISM Manufacturing Index. PMI Composite (Manufacturing). Auto Sales.
Thursday: Weekly Jobless Claims. Factory Orders. Lorie Logan speaks. Fed Balance Sheet.
Friday: Employment Report. PMI Composite (Services). ISM Services Index. Fed Officials speak: John Williams, Fed Vice Chair Philip Jefferson.
This Week: Notable Companies Reporting Earnings
Tuesday: NIKE, Inc. (NKE), Paychex, Inc. (PAYX)
Stay tuned...
