U.S. Stock markets ended the week with modest gains after much volatility but for the month ended down slightly. Markets sold off in the beginning of the week but rallied on Wednesday following comments from FED chair Janet Yellen that there is no fixed timetable to raise rates and a tentative OPEC agreement to cut oil output. Then there was a sharp selloff on Thursday over concerns of Deutsche Bank remaining solvent following a proposed $14BN settlement over the mortgage crisis. On Friday it appeared that there was a settlement for a smaller fine and stocks rallied sharply. While it is likely that Deutsche bank will need to raise capital this was not a Lehman moment. Crude oil prices ended the week up 8% and other commodities were generally higher. International stocks underperformed U.S. Stocks. Treasury yields saw little change as di the dollar.
In the numbers this week:
- The Commerce Department reported
- Purchases of new single-family homes declined a seasonally adjusted 7.6% in August. July sales were revised up to a gain of 13.8%. For the first eight months of the year sales were up 13.3% from last year.
- Durable goods orders were unchanged in August. For the first eight months of this year durable goods orders were down 0.6% from the same period last year. Excluding aircraft and defense, orders increased 0.6% in August.
- The second quarter gross domestic product was revised from a 1.1% annual pace to a 1.4% annual pace. The main component of the revision was due to business spending growing at a 1% rate versus a previously estimated 0.9% decline. While growth has averaged 2.0% since the economic expansion started in 2009 it has been below 1.5% for the most recent three quarters.
- Personal consumption was unchanged in August.
- The personal savings rate increased from 5.6% in July to 5.7% in August.
- The personal-consumption expenditures price index (The FEDs preferred measure of inflation) rose 0.1% in August and is up only 1.0% from the prior year. Excluding volatile food and energy the index was up 0.2% in August and 1.7% from a year ago.
- The S&P CoreLogic Case-Shiller Indices showed home prices rose 5.1% in July from a year ago.
- The U.S. Energy Information Administration reported in the prior week:
- Crude oil inventories fell 1.9MM barrels.
- Daily Crude oil production rose 19,000 barrels.
- Gasoline inventories rose 2.0MM barrels.
- Baker Hughes reported that the number of oil drilling rigs increased 7 to 425 in the prior week. The number of gas rigs increased 4 to 96.
- The Labor Department reported that first time claims for unemployment rose 3,000 to 254,000. The four week moving average of claims fell 2,250 to 256,00. Initial jobless claims have remained below 300,000 for 82 weeks, the longest stretch since 1970 which is very significant given the increase in the U.S. population.
- The National Association of Realtors reported that their index of pending home sales fell 2.4% in August.
- The Caixin China manufacturing index rose to 50.1 in September from August. 50 would be no change so 50.1 shows a slight gain. It has now been three months in a row that China’s manufacturing has stabilized following 15 months of contraction. The improvement may be largely due to increased government infrastructure spending. Unfortunately, there are increasing levels of corporate debt and a reluctance to reduce overcapacity which may pose problems in the long run.
Loren C. Rex, CFP®, AIF® Erik Smith
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
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.