Stocks rebounded last week after the prior week’s selloff.  All major indices were up with sharp gains in the Nasdaq 100 and the Dow 30 Industrials.

While the U.S. is still trying to reduce inflation to 2.0%, China is dealing with deflation.  As a result of low birth rates and a declining population, China is raising its retirement age for men from 60 to 63 and for women from 50 to 55,  except for management positions which will be age 58.  The change will be implemented gradually over 15 years.

The Federal Reserve will meet this week and is predicted to cut interest rates.  However, speculators are looking at 0.25% vs 0.5% cuts.  We believe the FED likely will move cautiously with a 0.25% cut.  Inflation has been declining but is still above target and the economy, while slowing, is still relatively strong.

The ECB enacted its second interest rate cut with the benchmark interest rate going from 3.75% to 3.5% citing declining inflation and soft growth.

Treasury bond yields rose with the 30-year bond yield at 3.994% and the 10-Year note at 3.681%.  Freddie Mac reported that the average 30-year mortgage rate fell to 6.20%.  Crude oil rose to $69.15 a barrel and natural gas rose to $2.360 per MMBTUs.  The U.S. dollar index rose to 101.28 and gold set a new record closing at $2585.90 an ounce.

In economic reports this week:

• The U.S. Treasury reported that the monthly deficit in August was $380BN and was $1.879BN since the beginning of the fiscal year on October 1^st.
• The Commerce Department reported:
  • Wholesale inventories rose 0.2% in July.

• • Median household incomes rose 4.0% in 2023 to $80,610 which was the first increase since the pandemic.
    • Household incomes fell 2.3% in 2022 to $74,580.
• The Labor department reported:
  • The consumer price index rose a seasonally adjusted 0.2% in August.  From a year ago the CPI was 2.5% down from 2.9% in July.
    • Excluding food and energy the CPI rose 0.3%, the highest rate in four months.  The year over year core was unchanged from July at 3.2% from a year ago. 
    • Shelter rose 0.5% and is up 5.2% year over year.
    • Transportation services rose 0.9% and 7.9% Y.O.Y.
    • Gasoline fell 0.6% and is down 10.1% Y.O.Y.
  • The producer price index for final demand rose a seasonally adjusted 0.2% in August.
    • From a year ago, the PPI has risen 1.9% and 2.9% excluding food, energy and trade services.
    • Services rose 0.4%.
    • Goods prices were unchanged.
  • Seasonally adjusted first-time claims for unemployment were 230,000, an increase of 2,000 from the previous week’s revised level.
    • The 4-week moving average of claims, designed to smooth out volatility, was 230,750, an increase of 500 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: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil was unchanged at 13.3MM BPD.
  • Natural gas storage rose 40BN cubic feet and is above the average level during the past five years at this time of year.
• Baker Hughes reported the number of oil rigs was rose 5 to 488 and the number of natural gas rigs rose 3 to 97.

Please call us if you have any questions.

Loren Rex – Emeritus

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

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.federalreserve.gov/releases/g19/current/g19.pdf

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

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

https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html