Stocks rebounded last week, with the S&P 500 climbing by 0.53 percent to 2,139.16. This was nowhere near a large enough increase to completely erase the prior week’s sharp 2.39 percent loss but it did at least raise the benchmark index’s 2016-to-date gain to 4.66 percent. The CBOE’s VIX volatility index, often referred to as investors’ “fear gauge,” actually ended last week lower despite major stock indices experiencing average intraday price fluctuations of more than 1 percent during the past five trading sessions. These wild swings in the market were largely driven by a deluge of mixed economic data, a big drop in the price of oil, and continued uncertainty about the Federal Reserve’s near-term timetable for interest rate normalization. For the latter, additional commentary from Fed officials exacerbated market volatility last week but overall the various speeches and interviews were a bit more dovish than anticipated.
This helped lower the market-implied probability of a rate hike being announced at the September Federal Open Market Committee (FOMC) meeting from 28 percent to 20 percent, which contributed to last week’s modest rebound in both equities and bonds. Most analysts now expect officials to proceed with a “hawkish hold” at this month’s policy meeting, where rates are left unchanged but the wording in the official statement from the Fed hints at a higher likelihood of hikes down the road. The Fed’s updated economic projections and press conference following the headline FOMC statement could also be used to send signals about a rate move later this year. Regardless, volatility seems likely to remain elevated this week, so retirement investors should try to stay focused on their long-term goal of building wealth and also consider consulting with a professional financial advisor if additional guidance is needed during this period of heightened uncertainty . As always, we are here to help with any questions you may have.
To recap what we learned about the U.S. economy last week, the positives included that mortgage and refinance applications rose, regional manufacturing activity rebounded, and headline inflation pressures in America remained muted. As for the negatives, retail sales growth disappointed expectations, businesses’ inventories-to-sales ratios held near recessionary levels, shelter and healthcare costs continued to outpace general consumer inflation, U.S. industrial production declined for the first time since May, capacity utilization fell, and small business owners’ reported level of optimism softened. This week the pace of economic data remains relatively slow but there are still several important reports on housing, employment, and manufacturing scheduled to be released, along with what will likely be a market-moving announcement on monetary policy from the FOMC this Wednesday.
What To Watch:
- Housing Market Index10:00 AM ET
- MBA Mortgage Applications7:00 AM ET
- EIA Petroleum Status Report10:30 AM ET
- FOMC Meeting Announcement2:00 PM ET
- FOMC Forecasts2:00 PM ET
- Fed Chair Press Conference2:30 PM ET
- Jobless Claims8:30 AM ET
- Chicago Fed National Activity Index8:30 AM ET
- FHFA House Price Index9:00 AM ET
- Bloomberg Consumer Comfort Index9:45 AM ET
- Existing Home Sales10:00 AM ET
- Leading Indicators10:00 AM ET
- EIA Natural Gas Report10:30 AM ET
- 10-Yr TIPS Auction 1:00 PM ET
- PMI Manufacturing Index Flash9:45 AM ET
- Atlanta Fed Business Inflation Expectations10:00 AM ET
- Regional Fed presidents panel 12:00 PM ET
- Baker-Hughes Rig Count1:00 PM ET
Sources: Econoday, Bloomberg, WSJ, CNBC, Twitter, Advisor Perspectives, FRBG
Post author: Charles Couch