Fed Cuts Rates, Stocks Retreat

Weekly Commentary — August 5th, 2019

The Week on Wall Street

Last week, the Federal Reserve cut interest rates for the first time in more than a decade, in line with Wall Street’s expectations. Ironically, stocks had their worst week of 2019.

The S&P 500 finished the week 3.10% lower. The Dow Jones Industrial Average and the Nasdaq Composite also posted weekly losses; the blue chips fell 2.60%, while the premier tech benchmark slumped 3.92%. International stocks tracked by MSCI’s EAFE index dipped 1.06%.[1],[2],[3]

Fed Cuts Benchmark Interest Rate

On Wednesday, the central bank reduced the federal funds rate by 0.25%. The latest Fed policy statement noted that “global developments” and “muted inflation” influenced the decision.

Addressing the media, Fed Chairman Jerome Powell described the cut as a “mid-cycle adjustment.” After that comment, Wednesday’s trading session turned volatile on the interpretation that the cut was a “one and done” move, instead of what might be the first in a series.[4]

More Tariffs Planned

Shares also fell Thursday, after a White House tweet indicated that the U.S. would put a 10% tariff on another $300 billion of goods coming from China, effective September 1.

Practically speaking, this would mean a tariff on nearly all Chinese products arriving in America. So far, the announcement has not affected plans for trade delegates from both nations to continue negotiations in September.[5]

The Latest Hiring Data

Payrolls expanded with 164,000 net new jobs in July, according to the Department of Labor. The headline jobless rate stayed at 3.7%; it has now been under 4% for 17 months. The U-6 jobless rate, which counts both underemployed and unemployed Americans, dipped to 7.0%, a level unseen since December 2000.

Monthly job growth has averaged 140,000 over the past three months, compared to 187,000 in 2018.[6]

 

THE WEEK AHEAD: KEY ECONOMIC DATA

Monday: The Institute for Supply Management releases its latest Non-Manufacturing Purchasing Managers Index, its monthly gauge of business activity in America’s service sector.

Source: Econoday / MarketWatch Calendar, August 2, 2019

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Marriott International (MAR), Tyson Foods (TSN)

Tuesday: Walt Disney Co. (DIS)

Wednesday: American International Group (AIG), CVS Health (CVS)

Thursday: Booking Holdings (BKNG), Uber (UBER)

Source: Zacks, August 2, 2019

Indices as of 8:2:19

 

“Friendship is born at that moment when one person says to another, ‘What! You too? I thought I was the only one.’”

– C.S. Lewis

 

 

Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues.

 

If you have any questions or would like to learn more about developing strategies to pursue a prosperous and safe future, contact me today at Derek.Merkler@Parsonex.com! You can also visit my websiteto learn about how I help our service members and veterans plan for and achieve financial independence.

My blog discusses a myriad of financial topics and challenges, book reviews, and commentary on current events in the financial world to benefit our military and veteran community.  I attempt to be as thorough as possible when examining each subject but can never account for every possible scenario.  Please remember to consult with your advisers for advice on your particular situation.  Thank you for reading!

Advisory Services offered through Parsonex Advisory Services, Inc. 8310 S. Valley Highway, Ste. 110, Englewood, CO 80112 (303) 662-8700.


[1]https://www.apnews.com/e15c18b9dbc44efab400d2214e2cb6f9

[2]https://www.wsj.com/market-data

[3]https://quotes.wsj.com/index/XX/990300/historical-prices

[4]https://www.forbes.com/sites/jjkinahan/2019/07/31/feds-quarter-point-rate-cut-weak-global-growth-trade-tensions-muted-inflation-cited

[5]https://www.cnn.com/2019/08/01/investing/asian-market-latest-trade-war/index.html

[6]https://www.cnn.com/2019/08/02/economy/july-jobs-report/index.html

 

Leave a Reply