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Newsletter: In the Markets – Week-Ending August 19
Crystal Brook Advisors
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United States: Federal Reserve officials sought to keep their options open at a July policy meeting as they tried to reconcile differences on the economic outlook and when to raise rates. The meeting minutes suggested a rate increase is a possibility as early as September.(1) For the first time in this election cycle, most economists surveyed by The Wall Street Journal believe uncertainty from the coming election is crimping economic activity. Respondents to WSJ survey cut their forecasts for 2016 GDP growth to 1.8% from 2% .(2)

Europe: British import prices rose in July at the fastest annual pace for five years, after voters’ decision to leave the European Union triggered a sharp fall in the pound.(3) The U.K. government is challenging the food and beverage industry to reduce overall sugar by one fifth across a range of products as part of a drive to tackle childhood obesity.(4)

Asia: Bank Indonesia left its interest rates unchanged for the second-consecutive month Friday, waiting for the recent easing measures to work on the economy.(5) In a setback for Chinese investment in strategic overseas industries, Australia made a binding decision to block two bidders from Hong Kong and mainland China from taking a controlling stake in the country’s largest electricity network, Power Grid.(6)

Monday 08/15

• U.S. stocks rose Monday, led by gains in commodity-linked shares as crude oil prices touched one-month highs.(7)
• Crude hit a one-month high Monday on hopes that the prolonged oil-price rout may drive major producers to reconsider a collective production cap.(8)
• Stocks at record highs come with rich valuations, a warning sign that matters not only for individual investors but also public pension funds that base their health on investment targets.(9)
• Fed-funds futures, used by investors to place bets on central bank policy, show a less-than-50% probability of a rate rise by December, according to CME Group.(10)

Tuesday 08/16

• Crude hit a one-month high on talk that the prolonged oil price rout may drive major producers to reconsider a collective production cap.(11)
• The Bank of England’s easing measures have notched an early success as companies rush to issue new debt, reinvigorating the U.K.’s ailing corporate-bond market.(12)

Wednesday 08/17

• U.S. government bonds pulled back after Federal Reserve officials signaled they remain interested in raising interest rates this year.In late afternoon trading, the yield on the benchmark 10year Treasury note was 1.576%, up from 1.554% Monday.(13)
• Ford Motor Co. plans to release a fully driverless car without a steering wheel or pedals in the next five years, the latest salvo in a technological arms race engulfing the global auto industry.(14)
• Gilt Trading Volume Soars August activity is seven times as high as earlier in the year, in wake of Brexit vote. Gilts have become the most actively traded bonds in Europe since Britain’s June vote to leave the European Union, another sign of how the U.K. has become the main driving force in global bond markets in recent weeks.(15)

Thursday 08/18

• Stocks React Meekly to Fed Report. Small rise shows that investors still expect rates will remain low; utilities sector rises 1.5%.(16)
• U.S. government bonds strengthened after investors learned that Federal Reserve policy makers recently asked to see more data before deciding on any rate increase.(17)
• Cisco Systems Inc. is cutting 5,500 employees—7% of its workforce—in the networking company’s latest reaction to market shifts, including customers favoring software over hardware. (18)

Friday 08/19

• U.S. rigs drilling for oil rose by 10 to 406 in the latest week, according to Baker Hughes, one of the world’s largest oil field services companies. It’s the eighth consecutive rise and the highest count since February. (19)

Market Close
U.S. stocks closed lower Friday, little changed for the week, as investors fretted over the possibility of a Federal Reserve rate hike in September. The Dow Jones Industrial Average DJIA, -0.24% declined 45.13 points, or 0.2%, to close at 18,552.57, for a weekly decline of 0.1%. The S&P 500 index SPX, -0.14% fell 3.15 points, or 0.1%, to close at 2,183.87, for a weekly decline of less than 0.1%. The Nasdaq Composite index COMP, -0.03% shed 1.77 points, or less than 0.1%, to finish at 5,238.38, for a weekly rise of 0.1% and an eighth straight week of gains.(20)

Contributor: Loren Lozano

Sources:
(1) Wall Street Journal

(2) Wall Street Journal

(3) Wall Street Journal

(4) Wall Street Journal

(5) Wall Street Journal

(6)Wall Street Journal

(7) Wall Street Journal

(8) Wall Street Journal

(9) Wall Street Journal

(10) Wall Street Journal

(11) Wall Street Journal

(12) Wall Street Journal

(13) Wall Street Journal

(14) Wall Street Journal

(15) Wall Street Journal

(16) Wall Street Journal

(17) Wall Street Journal

(18) Wall Street Journal

(19) Seeking Alpha

(20) MarketWatch