After weeks of low volatility, U.S. Stocks and bonds sold off sharply on Friday and were down for the week. The selloff was prompted after a normally dovish president of the Federal Reserve Bank of Boston, Eric Rosengren, said he sees a reasonable case for gradual interest rate increases. Market participants were also disappointed that the ECB did not increase or extend its monetary stimulus this week. However, odds are still that the ECB will do so at a subsequent meeting. Previously markets were disappointed in Japan holding off on more stimulus. This week there is growing speculation that Japan will run out of bonds to purchase in the next 18 months. All of this lends credence to the view that central bank policy has become less effective. If further stimulus is needed it will need to come from fiscal stimulus though governments spending money on programs.
U.S. Treasury yields were higher with the longer dated bonds seeing the biggest rise. The U.S. Dollar strengthened against a basket of currencies. Commodities were higher for the week with oil rising sharply following a drop in U.S. inventories due to the recent hurricane.
In the numbers this week.
- Eurostat reported that the gross domestic product of the Eurozone’s 19 members grew 0.3% in the second quarter and 1.6% from a year earlier.
- The Commerce Department reported:
- The U.S. Energy Information Administration reported in the prior week:
- Crude oil inventories fell 14.5MM barrels mainly due to bad weather delaying ships importing oil.
- Daily Crude oil production fell 30,000 barrels.
- Gasoline inventories fell by 4.2MM barrels.
- Baker Hughes reported that the US oil drilling rig count increase 7 to 414 while gas rigs increased 4 to 92.
- The Labor department reported:
- First time claims for unemployment in the prior week fell 4,000 to 259,000. The four week moving average of claims decreased 1750 to 261,250.
- The Institute for Supply Management reported its non-manufacturing index fell from 55.5 in July to 51.4 in August indicating a slower expansion.
- The Federal Reserve reported that U.S. consumer credit increased a seasonally adjusted 5.83% in July from June.
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Loren C. Rex, CFP®, AIF® Erik Smith
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
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Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.