THE WEEK ON WALL STREET
Stocks retreated last week. Traders worried that the formal impeachment inquiry of President Donald Trump might distract White House officials from their pursuit of a trade deal with China and shift the focus of Congress away from consideration of the United States-Mexico-Canada Agreement (USMCA). Also, news broke Friday that the White House was considering restricting levels of U.S. investment in Chinese firms. The Dow Jones Industrial Average lost less than the Nasdaq Composite and S&P 500. Blue chips declined 0.43% week-over-week, while the S&P fell 1.01%, and the Nasdaq dipped 2.19%. The MSCI EAFE index, tracking developed overseas stock markets, lost 0.89%.
INCOMES GROW, SPENDING SLOWS
Data released Friday by the Bureau of Economic Analysis showed household incomes rising 0.4% in August. Consumer spending improved just 0.1% last month, however; that was the smallest advance in six months. Another BEA report noted that “real” consumer spending (that is, consumer spending adjusted for inflation) rose 4.6% during the second quarter.
A SLIP IN CONSUMER CONFIDENCE
The Conference Board’s Consumer Confidence Index fell to 125.1 for September. That compares to a reading of 134.2 in August. Lynn Franco, the CB’s director of economic indicators, wrote that “the escalation in trade and tariff tensions in late August appears to have rattled consumers. However, this pattern of uncertainty and volatility has persisted for much of the year and it appears confidence is plateauing.” In contrast, the University of Michigan’s Consumer Sentiment Index ended September at 93.2, an improvement from a final August mark of 89.8.
WHAT’S AHEAD
On October 10, the Social Security Administration is scheduled to announce the 2020 cost of living adjustment (COLA) for Social Security retirement benefits. Earlier this month, Bureau of Labor Statistics yearly inflation data pointed to a possible 2020 COLA in the range of 1.6%-1.7%.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: The Institute for Supply Management presents its September Purchasing Managers Index for the factory sector, a barometer of U.S. manufacturing health.
Wednesday: ADP, the payroll processor, releases its September National Employment Report.
Thursday: ISM’s non-manufacturing PMI arrives, reporting on the state of the U.S. service sector.
Friday: The Department of Labor’s September jobs report appears, and Federal Reserve Chairman Jerome Powell gives a keynote speech at a Fed event in Washington D.C.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Wednesday: Lennar (LEN), Paychex (PAYX)
Thursday: Constellation Brands (STZ), Costco (COST), PepsiCo (PEP)
FINAL THOUGHTS
There is little technically to suggest there will be a breakout in either direction. Instead, it seems the all-time highs of the S&P500 (3,027) remain resistance, and the 100-day moving average (2,924) remains as support.
The big-picture story appears little changed. The Fed is supporting the markets by maintaining low interest rates while trade war headwinds prevent the stock markets from climbing much higher. We will likely remain stuck in this sideways pattern until corporate earnings tell us otherwise.
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September 30, 2019
