U.S. equities finished mixed after a bumpy session, as early optimism of reports that the U.S. is trying to set up a new round of trade talks with China were tempered following the release of the Fed’s Beige Book that indicated some concerns among some districts regarding tariffs and trade. Meanwhile, renewed scrutiny over the tech sector pressured the Nasdaq, but energy issues saw some strength amid the continued rally in crude oil prices on Iranian sanctions, a hurricane threatening the east coast, and as government oil inventories fell more than expected. Treasury yields and the U.S. dollar were lower following a cooler-than-expected wholesale inflation report, while gold was higher.
The Dow Jones Industrial Average (DJIA) rose 28 points (0.1%) to 25,999, the S&P 500 Index was 1 point higher at 2,889, and the Nasdaq Composite declined 18 points (0.2%) to 7,954. In moderate volume, 764 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq. WTI crude oil jumped $1.12 to $70.37 per barrel and wholesale gasoline gained $0.02 to $2.03 per gallon. Elsewhere, the Bloomberg gold spot price moved $7.28 higher to $1,205.87 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.4% to 94.85.
The Producer Price Index (PPI) showed prices at the wholesale level in August, and the core rate, which excludes food and energy, were down 0.1% month-over-month (m/m), missing the Bloomberg expectations of 0.2% increases. July’s headline rate was unrevised at a flat reading, and the core rate was unadjusted at a 0.1% gain. Y/Y, the headline rate was 2.8% higher, versus projections of a 3.2% gain and July’s unrevised 3.3% increase. The core PPI rose 2.3% y/y last month, south of estimates to match July’s unrevised 2.7% increase.
The MBA Mortgage Application Index declined 1.8% last week, following the prior week’s 0.1% dip. The downward move came as a 5.9% drop in the Refinance Index more than offset a 0.9% rise in the Purchase Index. The average 30-year mortgage rate increased 4 basis points (bps) to 4.84%.
The Federal Reserve released its Beige Book—an anecdotal report on the nation’s business activity used as a policy tool to prep for the next two-day meeting set to conclude on September 26th. The report indicated that while the economy expanded at a “moderate pace” during August, trade concerns and a lack of skilled workers were noted worries, with three of the 12 districts reporting weaker growth during the month. However, wage growth remained “modest to moderate” as employers look to offer benefits in order to attract employees. Expectations continue to run high that the Central Bank will announce a third rate hike for the year. However, following last week’s stronger-than-expected August nonfarm payroll report, notably the wage component that exceeded expectations, speculation of a December move nudged higher but still remains in question. Amid this backdrop, tomorrow’s release of the Consumer Price Index (CPI) is likely to be highly-scrutinized, expected to show a 0.3% m/m increase in August, following July’s 0.2% gain, while the core CPI rate is forecasted to match the prior month’s 0.2% rise. Compared to last year, prices are projected to be up 2.8% after July’s 2.9% gain, and the core rate is estimated to remain 2.4% higher. Weekly initial jobless claims are also slated for release, forecasted to have increased by 7,000 to 210,000.
©2018 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.
Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.