Traders finally heard what they had been waiting for after Federal Reserve Chair Jerome Powell gave clear indications that the central bank will lower interest rates in September. Powell noted that the labor market has cooled and inflation is slowing. In an up and down week for stocks, the major benchmark stock indexes ended up closing higher, led by the RUSSELL 2000. Crude oil prices rallied at the end of the week, but not enough to avoid closing in the red. Typically, falling interest rates stimulate economic growth, which includes rising demand for oil. However, worldwide energy demand, particularly in China, has waned, keeping oil prices somewhat muted. Ten of the 11 market sectors closed higher, led by materials, consumer discretionary, and financials. Energy ticked lower.
Last Week’s Economic News
- Sales of existing homes increased in July for the first time since February.
- Sales of new single-family homes also picked up steam in July.
- The national average retail price for regular gasoline remains high at $3.382 per gallon on August 19.
- For the week ended August 17, there were 232,000 new claims for unemployment insurance, an increase of 4,000 from the previous week’s level.
Eye on the Week Ahead
The second release of gross domestic product for quarter two is out this week. The initial estimate showed the economy expanded at an annualized rate of 2.8%. Also, out this week is the report on personal income and outlays for July, which is also a potential market mover. One of the most important parts of the report is the personal consumption expenditures price index, a measure of inflation favored by the Federal Reserve. In June, consumer prices ticked up 0.1% and rose 2.5% for the year ended in June.
Have a nice week!
Sincerely,
Robert G. Carpenter