Weekly Update 7/20/2018 – Mr. Powell Heads to Capitol Hill

US: S&P 500 Index +0.02%, Dow +0.15%, Nasdaq -0.37%
Europe: STOXX Europe 600 +0.2%, German DAX +0.2%, France CAC 40 -0.6%, U.K. FTSE 100 +0.2%
Asia: Japan Nikkei +0.4%, China Shanghai Composite -0.1%, Korea KOSPI  -0.9%
Rates/Commodities: 10-Year Treasury yield +7 basis points to 2.90%, WTI crude oil -4.1%, COMEX gold -0.8%

The S&P 500 Index lost ground late in trading on Friday, but still managed to close barely in the green, in-line with global stocks which were little changed overall. Buying was underpinned by positive U.S. economic data and generally upbeat corporate earnings, however, gains were kept in check as global trade concerns remained in the forefront. Investors also kept a close eye on Federal Reserve (Fed) chair Jerome Powell as he made the trek to Capitol Hill to give his semiannual, two-day testimony before Congress. His prepared remarks painted an upbeat picture of the economy and reaffirmed the Fed’s commitment (for now) to gradually raising rates, though he noted ongoing trade tensions could stifle wage growth and business spending should companies turn cautious.

Overseas, threats of further escalation of the ongoing trade dispute, which already includes tariffs on metals and grains, in addition to a strong U.S. dollar, dragged commodities prices broadly lower. The weakness led emerging markets equities to surrender last week’s gains. “Though emerging markets equities were pressured this week, they remain one of our best ideas over the balance of the year. We expect strong economic growth and attractive valuations may help the group recapture recent losses.” noted LPL Chief Investment Strategist John Lynch. Performance in developed markets was more of a mixed bag, though most major country indexes ended near-flat.

Next week’s economic data releases are highlighted by Purchasing Managers Index figures out of the U.S., Japan, and the Eurozone. View all the key events on our Weekly Global Economic & Policy Calendar.

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