The S&P 500 closed 0.82% higher last week as it reacted positively to moderating 10-year Treasury and average 30-year mortgage rates. Fed Chair Powell further allayed concerns about rising interest rates.
- After reaching 16-year and 20-year highs early last week, both the 10-year U.S. Treasury and 30-year mortgage rates declined, albeit modestly, in anticipation of a more dovish outlook expected in Fed Chair Powell’s speech to the annual, August central bankers’ conference in Jackson Hole, Wyoming.
- Chair Powell indicated that the Fed “will proceed carefully as we decide whether to tighten further” and will remain data dependent in making its decisions. He made no suggestion that recent signs of economic resilience have prompted Fed officials to change their rate outlook, which financial markets take to be another hint that a September rate hike is unlikely.
- None of the new data released last week signaled any further economic re-acceleration, and the employment data due out this Friday are expected to report an anemic 170,000 growth in new jobs in August.
- The unemployment rate is likely to remain at 3.5%, reflecting the labor shortages in several tight labor market sectors. Shortages are particularly acute in public service sectors especially for teachers, school bus drivers, hospitals, police departments, and prisons.
There was more bad news last week on China’s economic and financial markets, and its efforts to build a more robust alliance among the BRICS (Brazil, Russia, India, China and South Africa) were reported as not successful.
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