August 5 – August 9 Week in Review

It was a wild week on Wall Street as the worry warts took control. Concerns over growth, trade, yields, and even currencies all came into play. Despite all the negative mindedness, the S&P 500 only finished the week down 0.5%. The other major averages were down as well. The Dow Jones Industrial Average lost 0.8%, the Nasdaq Composite lost 0.6%, and the Russell 2000 lost 1.3%.

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Out of the 11 S&P 500 sectors, six finished lower while five finished higher. The energy and financials sectors underperformed, while the utilities and real estate sectors outperformed.

Two events were widely attributed to the early selloff that extended the previous week’s pullback: (1) China allowed the yuan to weaken beyond 7 per dollar in response to President Trump's tariff threat and (2) U.S. Treasury yields took a sharp downturn that further flattened the yield curve.

The former happened on Monday, which caused each of the major averages to lose more than 3% in the worst one day performance of 2019. Adding to the mood was the U.S. labeling China a currency manipulator for the first time since 1994 and China halting purchases of U.S. agricultural products.

Stocks recouped some losses once China signaled it will keep the yuan stable, but the market returned to those lows on Wednesday after yields tumbled. Once yields stabilized, though, the stock market was able to finish the week well off those lows despite the lingering trade and growth concerns.

Low interest rates were nothing new for the market, which has seen yields steadily decline since November. In fact, low yields, and the expectation that they will remain low due to global central banks signaling for easier monetary policy, has been cited as one of the main catalysts for the equity market rally this year.

The narrowing spread between the 2 year and 10 year yields was another cause for concern. The 2-10 spread, which is widely viewed as a possible indicator for a recession, narrowed to its lowest differential since 2007. By week's end, the 2 year yield finished down eight basis points to 1.63%, and the 10 year yield finished down 13 basis points to 1.73%.

In other markets the U.S. Dollar Index fell 0.5% to 97.54 and WTI crude lost 2.0% to $54.61 a barrel. Gold prices rose 3.5%, or $51.00, to $1508.50 an ounce last week, boosted by lower yields, the weaker dollar, and economic uncertainty. For the year, gold is now up 14.9%, just below the S&P 500's 16.4% return.

August 12 – August 16 Economic Calendar

  • Monday
  • Treasury Budget
    2:00 PM ET
  • Tuesday
  • NFIB Small Business Optimism Index
    6:00 AM ET
  • CPI
    8:30 AM ET
  • Redbook
    8:55 AM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • Import and Export Prices
    8:30 AM ET
  • Atlanta Fed Business Inflation Expectations
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET


  • Thursday
  • Jobless Claims
    8:30 AM ET
  • Philadelphia Fed Business Outlook Survey
    8:30 AM ET
  • Retail Sales
    8:30 AM ET
  • Empire State Mfg Survey
    8:30 AM ET
  • Productivity and Costs
    8:30 AM ET
  • Industrial Production
    9:15 AM ET
  • Business Inventories
    10:00 AM ET
  • Housing Market Index
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Treasury International Capital
    4:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
    • Friday
    • Housing Starts
      8:30 AM ET

       

    • Quarterly Services Report (Advance)
      10:00 AM ET
    • Consumer Sentiment
      10:00 AM ET
    • Baker-Hughes Rig Count
      1:00 PM ET

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. This commentary is a matter of opinion and is for informational purposes only. It is not intended as investment advice and does not address or account for individual investor circumstances. Investment decisions should always be made based on the client's specific financial needs, goals and objectives, time horizon and risk tolerance. The statements contained herein are based solely upon the opinions of Telemus Capital, LLC. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources, which we believe to be reliable, but not guaranteed.

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