Economic Journal - Monday, 8/31/2015

(As of 7:10 am PST)

US stocks slumped Monday, with the three major benchmarks on pace to wrap up one of the worst trading months in years. Fears over China persisted throughout the weekend as rumors swirled about that China’s central bank would begin backing off its stock purchase program that has propped up Chinese stocks recently. China’s Shanghai composite index continued its volatile trading pattern Monday, finishing the day down 0.82%, wrapping up its worst monthly performance in three years by tumbling 12.5% in August. As has been the trend recently, the China trade kicked up the selling pressure in Europe early and has now led to a disappointing US open. Also, adding to the risk-off scenario for US investors today, is a lack of clarity around the Federal Reserve’s rate hike timeline. This weekend’s annual summit in Jackson Hole, put on by the Kansas City Federal Reserve Bank, produced little in the way of clarity or direction as to when the central bank is set to raise interest rates. While many market participants now lean towards a December rate hike, there is still thought that a September hike could be in the cards, especially after comments from Vice Chairman Stanley Fischer over the weekend seemed to indicate a tone that hinted toward the latter. Economic data is light today with a report on Chicago business PMI falling slightly in August. Oil prices are giving back some of last week’s gains while gold is down slightly today. Interest rates are down as equity selling is bidding up the price of treasuries.

Economic Journal - Friday, 8/28/2015

(As of 7:15 am PST)

Futures pointed to a lower open for Wall Street Friday after two consecutive days of solid gains. Today’s open follows another volatile session in China which ended with the Shanghai index up 4.8% on the day, with much of that gain coming in the final hour of trading. Speculation that the Chinese government is buying stocks in an effort to prop up the market propelled shares higher in China. The artificial pricing will likely lead to more volatility next week. China’s strong Friday close was not compelling enough for European and US markets. European stocks sputtered throughout most of the session, with the Stoxx 600 on pace to finish down slightly on the week. In economic news, Personal Income and Spending for July rose 0.4% and 0.3% respectively, mostly in line with expectations. Core PCE prices (an indicator of inflation) rose 0.1%, also in line with expectations.  With inflation largely “under control” the case for a December Fed rate hike seems to be becoming the consensus in light of the recent global turmoil that has hit the markets. This weekend’s annual central banker’s summit in Jackson Hole, Wyoming will be especially important as investors will look for guidance from the Fed on setting interest rate expectations heading into the fall. Commodity prices are higher today with gold up 1% while oil also continues to climb after a record day yesterday. Interest rates are lower as investors snatched up treasuries.

Economic Journal - Thursday, 8/27/2015

(As of 7:15 am PST)

Markets opened firmly higher for the second consecutive day as investors held on to positions over night in an encouraging sign for market participants. Yesterday’s close of +620 points on the Dow, marked the largest single day percentage gain in 4 years. The rally which began at the open really picked up steam in the final hour of trade unlike the previous day which saw the markets swing to significant losses late in the session. Today’s rally is being fueled by a surprise revision to US GDP growth in the second quarter. According to a report released from the Commerce Department early this morning, the US economy grew at a 3.7% clip in the second quarter, much faster than the initial estimate of 2.3%. Stronger than expected business investment and consumer spending influenced the upward revision. In global news, Asian markets finished higher across the board with China’s Shanghai index finishing up 5.3%, with most of that gain coming in the final hour of trade on rumors of more Chinese central bank intervention. The positive Asian trade carried over into Europe with European indexes soaring on the day. Safe havens such as gold and the US treasury are down today, while oil prices are up more than 4% breaking through $40 per barrel. It’s been a remarkable turnaround since Monday’s opening bell, but we are far from out of the woods.