The bulls were out in force last week, with the Dow closing Friday at a new all-time high and mainland Chinese stocks recording their best weekly gains since 2016.
Although trade and tariff issues have yet to be resolved, investors chose to ignore the subject . The Dow jumped 2.3%, its best gain in more than two months, to close Friday at 26743, eclipsing its previous record high reached in January. The S&P 500 gained 0.8% for the week but closed fractionally lower on Friday to close just slightly below its record high, which was reached on Thursday. But not all U.S. stocks ended in the green. NASDAQ, which has been the best performing major U.S. index this year, took a breather, losing 0.3%. Midcap stocks were also down 0.3% while small cap stocks, which have largely benefited from trade worries, dropped 1.1%.
Foreign stocks also did well last week, with the best gains in Asia. The Shanghai composite index soared 4.3%, its best weekly gain since 2016, while Japanese stocks rose more than 3.4% for the second week in a row. Hong Kong stocks rose 2.4%, their best gain in over a month. Indian stocks, however, missed out on the rally, falling 3.3%, their third straight weekly loss. European stocks rose 1.7%, their best gain since July.
But while stocks were climbing higher, bond prices were moving in the opposite direction, boosting yields. In the U.S. Treasury market, the yield on the 10-year note pushed above the 3.00% mark on Tuesday and remained there the rest of the week, closing Friday at 3.06% after hitting 3.09% on Thursday. That was the longest sustained stretch above the psychologically important 3.00% level for the benchmark security since May. The Federal Reserve meets this week and is expected to raise the federal funds rate by 25 basis points to 2.25%, its highest level in more than 10 years. The meeting will conclude with updated Fed economic forecasts and a press conference with Fed Chair Jerome Powell.
Housing sector reports dominated the week’s economic news, and they were mostly on the weak side. Existing home sales were unchanged in August at an annual rate of 5.34 million. In some ways, though, that was a positive report, since it was the first month in the past five not to show a decline; however, sales are still 1.5% lower than they were a year ago. Housing starts jumped 9.2%, but that figure was skewed by a 29% increase in the usually volatile multifamily sector; single-family homes, the biggest category, rose 1.9% to an annual rate of 876,000. Permits, a forward indicator, fell 5.7%. The National Association of Home Builders’ confidence index held steady in September at 67. Outside housing, the Conference Board’s index of leading economic indicators rose another 0.4% in August after climbing 0.7% the previous month. Initial unemployment claims fell by 3,000 to 201,000, remaining at their lowest level since December 1969.
Reports/dates/facts/links worth paying attention to over the next week:
1. September 24: Chicago Fed national activity index for August.
2. September 25: Conference Board consumer confidence index for September; S&P Corelogic Case-Shiller home price indexes for July; the Federal Open Market Committee meeting begins in Washington.
3. September 26: New home sales for August; FOMC meeting ends at 2:00 p.m., followed by interest rate announcement, updated Federal Reserve economic forecasts, and Fed Chair Jerome Powell press conference.
4. September 27: Weekly unemployment claims; second quarter GDP, second and final revision; durable goods orders for August; pending home sales for August.
5. September 28: Personal income and outlays for August; University of Michigan consumer sentiment index for September, second reading.