Capital Market Implications for the Week of September 11 - 15, 2017
As there were a number of sectors disrupted by the recent hurricanes, last week’s economic releases were mostly mixed. The reports impacted by the storms included industrial production, retail sales and jobless claims. Although industrial production in August fell -0.9 percent, July’s production was revised upwards to 0.4 percent. Given it was gaining momentum prior to the storms, production may rebound quickly. Month-over-month August overall retail sales (sales including autos and gas) declined -0.2 percent. However, it is the revisions to this series in the wake of the hurricanes that will be most notable because sales are extrapolated from returns of just the first half the month. Initial unemployment claims, as expected, remained elevated last week and may remain elevated for some time. Finally, in the good news category, August’s consumer price index excluding food and energy increased for the first time in five months. As long as inflation isn’t declining, the Federal Reserve may be able to hike interest rates at least once more before year end.
Last week, with the power slowly coming back on in Florida and capital market participants seemingly ignoring the most recent provocation from North Korea, markets rebounded nicely. As such, for the week, the S&P 500 Index gained 1.6 percent while the Dow Jones Industrial Average rose 2.2 percent. The week’s best performing equity sectors were telecommunications and energy, up 3.9 percent and 3.5 percent, respectively. The poorest performing sector for the week was utilities, which dropped -0.3 percent. International stocks, as represented by the MSCI EAFE Index, increased 0.6 percent and emerging markets jumped 1.0 percent. With investors rotating back to risky assets, bonds sold off throughout the week as yields climbed. For the week overall, the Barclays U.S. Aggregate Bond Index and U.S. corporate bonds both sank -0.5 percent, ten-year municipal bonds dropped -0.4 percent while high yield bonds bucked the trend and rose 0.2 percent.
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