Market Update: Thursday, September 15, 2016

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  • Stocks open higher amid flood of data. U.S. indexes are clinging to modest gains in early trading as investors sift through a barrage of data including a manufacturing beat by the Philadelphia Fed Index and a retail sales miss. Wednesday’s session saw market strength wane throughout the day as the S&P 500 (-0.1%) and Dow (-0.2%) both lost ground; the Nasdaq (0.4%) held on to some gains thanks to outperformance in the tech sector. Weakness was evident once again in energy (-1.2%) as the sector led to the downside on the back of a nearly 3% drop in WTI crude oil, which is moving in and out of positive territory this morning near $44.50/barrel. Overseas, Japan’s Nikkei Index shed 1.3% even as rumors of further stimulus swirled, while the Shanghai Composite was closed for a holiday. In Europe, the Bank of England (BOE) left interest rates unchanged, but hinted at further monetary easing, spurring gains in the FTSE 100; though the rest of Europe is mostly lower. Meanwhile, COMEX gold ($1314/oz.) prices slid after U.S. economic data was released, while the yield on the 10-year note is up a couple basis points to 1.72%.

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  • Bank of England on hold. As expected, the BOE met this morning and by a unanimous vote left both interest rates and the pace of bond purchases (quantitative easing) unchanged. Post-Brexit vote data have generally been strong in the U.K., removing any urgency for a change in monetary policy. The BOE did suggest that it could cut rates at its next meeting in November, though several members suggested that policy should remain the same or even reverse. There is increasing consensus that loose monetary policy has reached its level of effectiveness.
  • What to make of today’s deluge of data for August and September.While initial claims and the Philadelphia Fed Manufacturing Index for September beat expectations, and the September Empire State Manufacturing Index was in-line with expectations, the August readings on retail sales and industrial production (IP) came in below expectations. It appears that consumer spending in Q3 is slowing after a torrid Q2, despite record high household net worth and a tightening labor market, supported by yet another 40+ year low reading on initial claims. On the manufacturing front, while the August IP data disappointed, mining output rose for the fourth consecutive month, suggesting that energy-related capital spending is on the mend. The September manufacturing data (Empire and Philadelphia) were mixed, but generally showed further stabilization and even some improvement as Q3 ended. This dataset likely keeps the Federal Reserve Bank (Fed) on track to take a pass next week but tighten in December, and leaves Q3 gross domestic product (GDP) running near 3.0%.

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Thursday

  • Retail Sales (Aug)
  • Philadelphia Fed Mfg. Report (Sept)
  • Empire State Mfg. Report (Sept)
  • UK: Bank of England Meeting (No Change Expected)

Friday

  • Household Net Worth/Flow of Funds (Q2)
  • EU Leaders Summit Meeting
  • Russia: Central Bank Meeting (Rate Cut Expected)

Click Here for our detailed Weekly Economic Calendar

Important Disclosures

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

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