Telemus Weekly Market Review August 19th - August 23rd, 2019

August 19 – August 23 Week in Review

The stock market was on pace to snap a three week losing streak until Friday, when China announced retaliatory tariffs, to which President Trump responded by demanding companies start finding alternatives to China. When it was all said and done the S&P 500 fell 1.4% last week, the Dow Jones Industrial Average declined 1%, the Nasdaq Composite lost 1.8% and the Russell 2000 dropped 2.3%.

The week was sailing along smoothly until China announced it plans to impose 5%-10% tariff rates on $75 billion of goods imported from the U.S. on Sept. 1 and Dec. 15. Those are also the dates the U.S. is planning on enforcing additional tariffs on Chinese imports. In addition, China said it plans to impose 5%-25% tariffs on imported autos and auto parts starting Dec. 15.

In retaliation President Trump ordered U.S. companies to find alternatives to China and said he would make sure to respond more fully to Beijing's actions later. The news overshadowed what was supposed to be last week's main event in Fed Chair Powell's speech from Jackson Hole, Wyoming. Mr. Powell reiterated the Fed will act as appropriate to sustain the economic expansion.

Most S&P 500 sectors reversed course and finished last week in negative territory. The materials, energy, and health care led the decline. The utilities and consumer discretionary sectors finished higher, with the latter finding support in some of the big retail stocks like Home Depot, Lowe's, Target following their better than expected earnings reports.

Separately, there was a lot of stimulus talk throughout the week. China and Germany specified plans to stimulate growth, although Germany's plan would transpire only in an economic crisis. On the home front, the Trump administration was considering various tax cuts to aid the economy despite repeated claims on how great the economy is doing.

Preliminary economic data showed the U.S. manufacturing sector decline into contraction territory. The Markit flash manufacturing PMI for August ticked down to 49.9 from 50.4. A reading below 50.0 denotes a contraction, which was its first one since 2009.

Several Fed officials, meanwhile, held reservations about further cuts to the fed funds rate. Kansas City Fed President George, an FOMC voter in 2019, Philadelphia Fed President Harker, an FOMC voter in 2020, and Dallas Fed President Kaplan, an FOMC voter in 2020, leaned less dovish in interviews last week.

In the U.S. Treasury market, the 2 year note yield briefly rose above the 10 year yield multiple times during the week. The stock market, however, didn't appear too shaken up about the brief inversions this time around. At last week's end, the 2 year yield finished six basis points higher to 1.53%, and the 10 year yield finished one basis point higher to 1.53%.

In other markets the U.S. Dollar Index fell 0.5% to 97.65 and WTI crude declined 1.3%, or $0.73, to $54.16 a barrel.

August 26 – August 30 Economic Calendar