As the start of today’s session approaches, stock futures are indicating a slightly negative open for the major U.S. indexes. In overnight trading, markets in Asia ended their day with small gains. Meanwhile, the major European indexes are all in the green. Elsewhere, oil prices have moved higher, with West Texas Intermediate up 0.6%, to around $80.60 a barrel.
August has been a challenging month for equities, with the Dow, S&P 500, and the NASDAQ composite showing losses ranging from 2.8% to 4.5%. Moreover, judging by the direction of short-term interest rates, it appears the situation may not get much better anytime soon. In general, as the payouts on fixed-income investments rise, stocks tend to fall increasingly out of favor. As it stands, the yield on the 1-year Treasury note hit 5.55% on Monday, reaching a level that has not been seen in 23 years. Another thing to keep in mind is that September (which has historically been the worst performing month for the stock market) is just around the corner.
Turning to the economic calendar for this week, we find several key reports on the docket. The National Association of Realtors is due to release its July figures for pending home sales on Wednesday. Higher mortgage rates have been putting a damper on business, and Wall Street is looking for a decline of around half a percent, versus the 0.3% uptick in June. On Thursday, the Department of Commerce will release its Personal Consumption Expenditures (PCE) Price Index for August, a measure that is closely watched by the Federal Reserve. Consensus estimates indicate an increase of 0.2%, which would be flat with the month before.
Friday brings the U.S. nonfarm payrolls report for August, with expectations calling for an increase of 170,000 (down from 187,000 the month before). Additionally, the Street is looking for the unemployment rate for that month to come in unchanged at 3.5%. Meanwhile, the Institute for Supply Management is due to release its index for U.S. manufacturing activity in August, with estimates hovering around 46.6% (versus the July reading of 46.4%). If that turns out to be the case, it would mark the tenth consecutive month of contraction. (Percentages above 50 indicate expansion, while those below 50 denote a decline.) Finally, the report on construction spending for July is anticipated to match June’s gain of 0.5%.
Summing up Monday’s price moves, the Dow Jones Industrials gained 213 points, or 0.6%, the S&P 500 climbed 27 points (0.6%), and the tech-focused NASDAQ finished up 114 points (0.8%). – Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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