Prior Week Summary
The major U.S. equity indices moved lower for a second straight week as trade uncertainty, mixed U.S. economic data, and political turmoil in Washington weighed on investor sentiment. Early in the week, Treasury Secretary, Steven Mnuchin, gave markets a boost when he indicated that U.S. and Chinese officials still planned to meet in early October in Washington. In a show of goodwill, China agreed to waive retaliatory tariffs on approximately three million tons of U.S. soybeans, but President Trump soured market participants' hopes of easing tensions in his U.N. address saying, “Not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of intellectual property and also trade secrets on a grand scale.” Markets were further disrupted by increasing political drama, when the Speaker of the House of Representatives, Nancy Pelosi, called for a formal impeachment inquiry after a whistleblower complaint raised concerns about President Trump’s use of power on a July phone call with President Volodymyr Zelensky of Ukraine.
On the U.S. economic front, data releases for the week were largely mixed. The third estimate of Q2 GDP indicated that the U.S. economy grew at a 2% pace, in line with expectations, but down from the first quarter’s 3.1% pace. New home sales topped analyst estimates suggesting a strong housing market after the August readings for existing home sales and housing starts also beat consensus estimates earlier in the month. The Conference Board Consumer Confidence Index fell far below expectations as did the latest consumer spending figures, raising questions about the health of the U.S. consumer.
The Look Forward
Market participants will be turning their attention toward Friday’s release of the September employment report, as well as updated figures on construction spending, factory orders, durable goods orders, and the ISM Manufacturing Index, among others. A host of Fed officials have scheduled speaking engagements this week, including Federal Reserve Chairman, Jerome Powell, who speaks at a “Fed Listens” event on Friday.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Fixed Income Snapshot
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