Stocks End Week on Down Note…..

U.S. equities finished the last trading day of the week lower, as trade worries resurfaced after the Trump administration’s announcement of additional tariffs on $50 billion on goods imported from China were answered by an equal amount of tariffs by the Asian nation on U.S. products. News on the economic front was mixed, as industrial production declined, a read on consumer sentiment topped forecasts and regional manufacturing activity unexpectedly moved further into expansion territory. Treasury yields, gold and crude oil prices were all lower and the U.S. dollar was nearly flat.

The Dow Jones Industrial Average (DJIA) declined 85 points (0.3%) to 25,090, the S&P 500 Index lost 3 points (0.1%) to 2,779, and the NASDAQ Composite decreased 15 points (0.2%) to 7,746. In very heavy volume as a result of quadruple-witching, the simultaneous expiration of stock and index futures and options, 2.4 billion shares were traded on the NYSE and 2.9 billion shares changed hands on the NASDAQ. WTI crude oil traded $1.83 lower to $65.06 per barrel and wholesale gasoline was down $0.07 at $2.02 per gallon. Elsewhere, the Bloomberg gold spot price tumbled $21.58 to $1,280.67 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 94.80. Markets were mixed for the week, as the DJIA fell 0.9%, the S&P 500 Index was nearly flat, while the NASDAQ Composite advanced 1.3%.

Industrial production declined, while manufacturing in NY region soared…..

The Federal Reserve’s industrial production report showed a 0.1% month-over-month (m/m) decline in May, compared to estimates of a 0.2% gain, versus April’s upwardly revised 0.9% increase. This ended three-straight months of gains as manufacturing and factory production declined which largely reflected a disruption in truck assemblies due to a fire at a parts supplier, but utilities and mining output both rose. Capacity utilization ticked lower to 77.9% from the prior month’s upwardly revised 78.1% rate where forecasts were expecting it to remain. Capacity utilization is 1.9 percentage points below its long-run average.

The June preliminary University of Michigan Consumer Sentiment Index improved to 99.3, compared to expectations for an increase to 98.5, and versus May’s final read of 98.0. The current economic conditions component of the survey advanced to the second-highest reading since 2000, while the expectations measure declined. The 1-year inflation forecast ticked higher to 2.9% from 2.8%, and the 5-10 year inflation forecast also increased slightly to 2.6% from the previous 2.5% rate, where it had remained for five months.

The Empire Manufacturing Index showed output from the New York region unexpectedly accelerated and moved further into solid expansion territory (a reading above zero) for June. The index rose to 25.0 from May’s unrevised 20.1 level, with forecasts calling for a reading of 18.8.

Treasuries were higher, as the yields on the 2-year and the 10-year notes, as well as the 30-year bond declined 2 basis points (bps) to 2.55%, 2.93% and 3.04%, respectively.

Schwab Center for Financial Research – Market Analysis Group

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