Most major stock indices ended higher boosted by the Federal Reserve cutting interest rates.  Developed international was the exception with a modest decline.  Economic data was mixed with an increase in retail sales and a decrease in housing starts.

The Federal Reserve met and chose to cut the Fed Funds rate 0.25% to a range of 4.00% to 4.25%.  11 of the 12 FED voting members voted for the quarter point cut with only newly appointed FED member, Stephen Miran, voting for a half point cut.  Fed members projected there may be two more quarter point cuts this year.  The FED’s statement, it justified its cut “in light of the shift in the balance of risks”, as the labor market has softened recently.  Chairman Powell stated that the FED still sees the possibility of inflation rising this year primarily due to tariffs, but it is believed that the increase in inflation may be less than expected a few months ago.  He characterized the cut as a “risk-management cut”, in case the economy slows dramatically.

The Bank of Canada met and chose to cut its benchmark interest rate 0.25% to 2.5%, the first cut since March.  The bank cited a weaker economy and less upside risk to inflation.

The Bank of Japan met and chose to keep its benchmark rate at 0.5% but kept the door open to an October hike.  The BOJ also chose to start selling its $508 stockpile of exchange traded stock funds.

The Bank of England met and chose to keep its benchmark rate at 4.0%.  The BOE Governor, Andrew Bailey stated that while there are risks of both higher inflation and weaker employment, there may be more rate cuts ahead.  The BOE also chose to slow its pace of quantitative tightening by limiting long-dated bond sales.

Treasury bond yields rose with the 30-year bond yield at 4.750% and the 10-Year note at 4.134%.  Freddie Mac reported that the average 30-year mortgage rate fell to 6.26%.  Crude oil rose to $62.71 a barrel and natural gas fell to $2.910 per MMBTUs.  The U.S. dollar index rose to 97.66 and gold rose to $3716.00 an ounce.

In economic reports last week:

• The Federal Reserve reported that industrial production rose 0.1% in August after declining 0.4% in July.
  • From a year ago, industrial production rose 0.9%.
  • Manufacturing rose 0.2% in August
    • Motor vehicle production rose 2.6% in August.
    • Mining, including oil and gas production rose 0.9%.
    • Utilities fell 2.0%.
• The Commerce Department Reported:
  • The advanced estimate of seasonally adjusted retail sales rose 0.6% in August, following a 0.6% increase in July.
    • From a year earlier, retail sales have climbed 5.0%.
    • Retail sales are not adjusted for price increases.

• • Housing starts fell a seasonally adjusted 8.5% in August and were down 6.0% from a year ago.
    • Single family housing starts fell 7.0% while multi-family housing starts (5 or more units) fell 11.0%.
    • Permits, a sign of future housing starts, fell 3.7%.

• The Labor Department reported:
  • The import price index rose 0.3% in August following a 0.2% increase in July.
    • The import price index does not include the cost of tariffs.
    • Fuel import prices dropped 0.8%.
    • Excluding fuel, import prices rose 0.4% in August.
  • The export price index fell 0.7%.
    • Agricultural prices fell 6.7%.
    • Excluding agricultural prices, the index fell 0.1%.
  • Seasonally adjusted first-time claims for unemployment were 231,000, down 33,000 from the previous week’s revised level.
    • The 4-week moving average of claims, designed to smooth out volatility, were 240,000, a decrease of 750 from the previous week’s revised level.
    • Recurring claims were 1.920MM down 7,000 from the previous week’s revised level.
  • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf
• The EIA weekly oil report is here: Weekly Petroleum Status Report.  Also, the EIA reported in the prior week:
  • Field production of crude fell from 13,495MM BPD to 13,482MM BPD.
  • Natural gas storage rose 90BN cubic feet and was above its average level during the past five years at this time of year.
• Baker Hughes reported the number of oil rigs rose 2 to 418 and the number of natural gas rigs was unchanged at 118.

Please call us if you have any questions.

Loren Rex – Emeritus

Erik A Smith, AIF® – President & C.E.O.

Nicholas Acri, CFP® – Partner & Wealth Advisor

Dylan Thomas, CFP® – Partner & Wealth Advisor

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).

Sources:

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

https://ir.eia.gov/ngs/ngs.html

https://www.freddiemac.com/pmms

https://www.wsj.com/market-data?mod=nav_top_subsection

https://bakerhughesrigcount.gcs-web.com/na-rig-count

https://www.census.gov/economic-indicators

https://www.bls.gov/news.release/ximpim.nr0.htm

https://www.federalreserve.gov/releases/g17/current/