Hello, this is Claire Ellerhorst, Senior Portfolio Manager at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices were higher last week, supported by dovish comments from the Federal Reserve Chair and better corporate earnings takeaways on Friday. The S&P 500 Index rose 1.5% in total return for the week, while the Dow Jones Industrial Average rose 1.3% and the Nasdaq Composite Index rose 1.4%. The S&P and Nasdaq finished higher for a second straight week, despite significant pullbacks in Thursday trading. The S&P 500 Index is now less than 1% away from its record closing high.
Federal Reserve Chair Jerome Powell spoke in Jackson Hole, where he noted the cooling labor market conditions and argued “the time has come for policy to adjust.” These comments all but confirm that central bank officials plan to begin reducing interest rates at the policy meeting next month. Consensus expectations are for a 25-basis point rate cut in September though the odds for a 50-basis point rate cut have increased in recent days. Minutes from the July Federal Open Market Committee meeting were also released last week, which noted that the majority of Fed officials saw a September interest rate cut as likely appropriate.
The U.S. economic calendar was relatively light last week. A few housing data points surprised to the upside. Sales of existing homes rose 1.3% month-over-month in July to a seasonally adjusted rate of 3.95 million. This followed four months of declines for existing home sales. On a year-over-year basis, existing home sales rose 2.5% in July. New home sales rose more than expected to their highest level in more than a year, up 10.6% from a month earlier and 5.6% from a year earlier. Last week saw U.S. 30-year mortgage rates drop to a new low year-to-date. There were also positive takeaways from several corporate earnings reports, particularly in retail and technology.
In the week ahead, the economic calendar includes more housing data, consumer confidence and an updated reading on second quarter economic growth. Perhaps most closely watched will be the report on July personal consumption expenditures, which includes the Fed’s preferred measure of inflation.
As always, we’ll be watching and reporting back to you. Thank you.
