Capital Market Implications for the Week of August 13 - 17, 2018

Maureen Kelliher

August 13, 2018

Weekly Economic Review

Last week, although consumer sentiment took a dip in early August, retail sales for July were robust suggesting the consumer felt confident enough to kick-off the back-to-school season early. Additionally, such a strong consumption number in July bodes well for overall growth in the third quarter. On the housing front, activity was mixed; homebuilder’s sentiment remained steady in August, but housing starts did not rebound from June’s softness while building permits ticked up in-line with forecasts. Most likely reflecting reactions to the trade skirmishes, industrial production picked up substantially in June only to ebb in July. On the other hand, economic indicators rose in July indicating the economy will continue to expand for the remainder of the year.

A surprisingly strong earnings report from Walmart coupled with news that low-level trade talks would resume between the U.S. and China this month sent markets higher last week. Helped by Walmart the Dow Jones Industrial Average rose 1.5% while the S&P 500 Index gained 0.7%. The majority of stock sectors rallied last week however several sectors were flat and only energy declined, off -3.4%. Hope of renewed trade talks did little for international stocks, as the MSCI EAFE Index sank -1.1% and emerging markets slumped-3.7%. With the 10-year Treasury yield holding steady at 2.87%, the bond pits had a relatively quiet week. Thus, for the week overall, the Barclays U.S. Aggregate Bond Index, U.S. corporates and high yield bonds all ended unchanged while ten-year municipal bonds gained 0.2%.