Market momentum turned positive during the middle of last week – the Dow Jones Industrial Average rose over 200 points last Wednesday on easing tensions in Hong Kong – and jumped over 400 points on Thursday after the U.S. and China agreed to hold trade talks. The trade dispute between the world’s two largest economies has been escalating of late and new tariffs kicked in this month. Given that, the announcement of new trade negotiations came as a relief to investors, especially given comments by a Chinese insider that there is the possibility for a “breakthrough” between the two sides.
The stock market also benefitted last week from expectations the Federal Reserve Bank will cut interest rates this month, with Chairman Powell stating the Fed will act as appropriate to sustain the current economic expansion. According to the CME Group’s FedWatch Tool, there is over a 90% probability for a ¼ point rate cut at the September 18th meeting. So the August Jobs Report did not significantly alter the outlook for a rate cut. The U.S. Department of Labor reported the economy added 130,000 jobs in August (below expectations for an increase of about 150,000), and that the unemployment rate held steady at 3.7%.
Put it all together and the major stock market averages posted decent returns last week. The Dow Jones Industrial Average increased 1.5%, while the NASDAQ Composite and the Standard & Poor’s 500 Index each rallied 1.8 percent. The positive trend from last week carried over to this morning with stocks trading slightly higher as Treasury Secretary Mnuchin said there is a “conceptual” agreement with China regarding enforcement of any future trade deal. Headlines and developments can change quickly of course, but so far at least the week is off to a positive start. As always, call us with any questions you may have or if you would like to set up a meeting.
All the best – Southport Station Financial Management, LLC