U.S. Equities Take a Breath

September 3, 2019 Chatham Financial

Prior Week Summary

The major U.S. equity indices advanced last week, notching their first weekly gains since late July as a reprieve from the harsh rhetoric by the U.S. and China seen the week prior, and solid economic data in the U.S. worked to improve investor sentiment. The second estimate of 2nd quarter GDP saw the U.S. economy accelerate at a 2.0% pace, lower than last month’s initial estimate of 2.1%, but nonetheless topping consensus expectations calling for 1.8% growth. The U.S. consumer also appears to be on solid footing as consumer spending increased 4.7% in the 2nd quarter, far above consensus estimates and 0.6% in July with the latest readings of the Conference Board Consumer Confidence Index indicating that sentiment remains near its highest point in recent memory. Additionally, the Dallas Fed Manufacturing Outlook and durable goods orders posted better-than-expected figures, but pending home sales fell much lower than consensus estimates. In Germany, the second estimate of 2nd quarter GDP confirmed that the German economy slowed 0.1% to end the 1st half of 2019, and the latest inflation data indicated prices drop 0.2% month over month.

After the U.S. and China announced plans to levy new tariffs the prior week, dialogue between the two sides has seemingly improved with a spokesperson for China commenting, “China has ample means for retaliation, but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war. China is lodging solemn representations with the U.S. on the matter.” Also promising for trade negotiations, President Trump has indicated that a September meeting between the two sides is still scheduled saying, “We are talking to China, the meetings in September, that hasn’t changed.” Both countries implemented additional tariffs as-scheduled on Sunday.

The Look Forward

Market participants are gearing up for a busy week as updated figures on construction spending, factory orders, the ISM Manufacturing Index, and the August employment report are scheduled for release this week. A host of Federal Reserve officials have speaking engagements throughout the week, most notably Federal Reserve Chairman, Jerome Powell, who speaks on the economic outlook in Zurich on Friday.

Rates Snapshot

 

Market Implied Policy Path (Overnight Indexed Swap Rates)

Source: Chatham Financial

 

Fixed Income Snapshot

Source: Bloomberg Finance L.P.

Disclosures

Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal/notices/.

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved. 19-0223

Previous Article
U.S., China Agree to Meet
U.S., China Agree to Meet

The major U.S. equity indices moved higher for a second straight week as U.S./China trade war optimism outw...

Next Article
Trade War Escalates
Trade War Escalates

U.S. equities looked poised to snap a streak of weekly losses until an escalation of the U.S./China trade w...

×

Subscribe to Chatham's Weekly Market Insights

First Name
Last Name
Company Name
!
Thank you!
Error - something went wrong!