Markets Finish Volatile Week Mixed…..

U.S. equities ended the final session of an extremely volatile week mixed and in a tight range, after witnessing a tumble on Monday and a two-day rally to recoup those losses. The markets have been unsettled amid the festering Chinese real estate debt crisis, while contending with what appears to be a more hawkish Fed that set expectations for tapering of monthly asset purchases this year following its monetary policy decision this week. The bond and currency markets were also choppy this week, exacerbated by rallies in European currencies and bond yields amid expectations that monetary policies in the region are on the path to tightening. Treasuries dipped to extend this week’s steepening of the yield curve, and the U.S. dollar pared some of yesterday’s fall. Gold traded modestly to the downside in choppy action and crude oil prices were higher. The economic calendar delivered a second-straight monthly gain in new home sales despite lingering supply and affordability issues. On the equity front, Dow member Nike missed revenue expectations and lowered its guidance on supply chain challenges, while Costco Wholesale topped Q4 expectations. Europe finished mostly lower, giving back some of yesterday’s gains, while Asia was mixed amid lingering Chinese debt issues.

The Dow Jones Industrial Average rose 33 points (0.1%) to 34,798 and the S&P 500 Index nudged 7 points (0.2%) higher to 4,455, while the Nasdaq Composite lost 5 points to 15,048. In moderate volume, 763 million shares were traded on the NYSE and 3.9 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.68 to $73.98 per barrel. Elsewhere, the gold spot price fell $2.50 to $1,747.30 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.3% higher to 93.36. Markets were mixed for the week, as the DJIA gained 0.6%, the S&P 500 increased 0.5%, and the Nasdaq Composite was flat.

New home sales rose 1.5% month-over-month (m/m) in August to an annual rate of 740,000 units, above the Bloomberg forecast calling for a rate of 715,000 units, and compared to July’s upwardly-revised 729,000-unit level. The median home price jumped 20.1% y/y to $390,900. New home inventory nudged higher to a 6.1-months supply at the current sales pace from the 6.0-months level in July. Sales in the Northeast surged m/m, and also rose in the South and West, but sales in the Midwest fell. Sales in all the major regions were solidly lower compared to the same period a year ago. New home sales are based on contract signings, offering a timelier read on housing activity compared to the larger contributor of existing home sales, which are based on closings.

The markets continue to digest Wednesday’s Fed monetary policy decision where the Central Bank hinted that formal details of balance sheet tapering may come in November, while there were notable changes in economic/inflation projections and rate hike expectations.

Treasuries declined, adding to yesterday’s drop that boosted yields in the wake of this week’s Fed’s decision and amid rising yields in Europe, as the yield on the 2-year note ticked 1 basis point (bp) higher to 0.27%, the yield on the 10-year note gained 2 bps to 1.45%, and the 30-year bond rate advanced 4 bps to 1.98%.

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