Week of August 19 - 23, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

August 28, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (Aug 17) 216k est., 209k actual, 221k prior
Continuing Claims (Aug 10) 1707k est., 1674k actual, 1728k prior
Existing Home Sales (Jul) 2.5% est., 2.5% actual, -1.3% prior: R+
Markit US Manufacturing PMI (Aug P) 50.5 est., 49.9 actual, 50.4 prior
Markit US Services PMI (Aug P) 52.8 est., 50.9 actual, 53.0 prior
Leading Index (Jul) 0.3% est., 0.5% actual, -0.1% prior: R+
Kansas City Federal Reserve Manufacturing Activity (Aug) 1 est., -6 actual, -1 prior
Richmond Federal Reserve Manufacturing Index (Aug) -2 est., 1 actual, -12 prior
Dallas Federal Reserve Manufacturing Activity (Aug) -4.0 est., 2.7 actual, -6.3 prior
New Home Sales MoM (Jul) 0.2% est., -12.8% actual, 20.9% prior: R+
Durable Goods Orders (Jul P) 1.2% est., 2.1% actual, 1.8% prior: R-
Capital Goods Orders Nondefense Ex Aircraft (Jul P) 0.0% est., 0.4% actual, 0.9% prior: R-
S&P CoreLogic CS 20-City Price YoY (Jun) 2.30% est., 2.13% actual, 2.39% prior
Conference Board Consumer Confidence Survey (Aug) 129.0 est., 135.1 actual, 135.7 prior

 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Directional change based on general
long-term tends.

Capital Market Implications

Last week’s economic releases were again mixed, as consumer related reports remained healthy while manufacturing reports weakened - albeit at a decelerating pace.  The flash manufacturing PMI for August fell below the all-important 50 level, suggesting the sector contracted for the first time in more than seven years.  On the other hand, August’s flash service PMI remained healthy at 50.9 but the level was also well below prior readings.  Regional Federal Reserve manufacturing surveys for August suggested the sector continued to struggle, as two of the more prominent regions, Dallas and Kansas City, were mixed.  However, on a more upbeat note, both capital goods orders and durable goods orders for July were positive and well above expections.  Finally, according to the Conference Board Consumer Confidence Survey for August, consumers’ confidence remained high as the survey’s level was just below its all-time peak.

Last Friday, President Trump retaliated against China’s announcements of $75 billion of new tariffs on US goods by demanding US companies cut ties with China and escalating tariffs.  Investors interpreted the volley as an escalation of the trade wars, which sent stocks plunging on Friday and into negative territory for the week overall.  Thus, the S&P 500 Index sank -1.4% last week and the Dow Jones Industrial Average lost -1.0%.  The sell-off was broad based as most sectors of the S&P 500 fell more than one percent.  As international markets closed before the US, foreign markets escaped some of the carnage.  As such, developed foreign markets rose 0.8% last week and emerging markets gained 0.4%.  In contrast to stocks last week, bonds were a sea of calm.  The Barclay’s aggregate bond index and ten-year municipal bonds closed the week flat while US corporate bonds and high yield bonds rose slightly.