Historically volatile September is so far a Steady Eddie as markets regain optimism with calming trade wars. Insiders, however, are selling.
The markets
Our heart and hopes go out to those affected by Hurricane Florence, which has forced nearly a million people to evacuate their homes. The fear of Flo has pushed shares of Home Depot (HD) and Lowe’s (LOW) up 1.7% and 3.1% respectively this week as of Thursday’s close. Outside of the obvious impact of the storm on home improvement stocks, shares of United Rentals (URI) gained 8.5%, Beacon Roofing Supply (BECN) rose 3.6%, while rental car companies Hertz Global Holdings (HTZ) and Avis Budget Group (CAR) gained 4.8% and 7.8% respectively.
On the other end of the spectrum, insurance companies are crying, “Please no Flo” as Allstate (ALL) and Travelers (TRV) fell 2.0% and 2.8% respectively. And as one might suspect, Flo led a number of airlines to preemptively cancel flights, which could weigh on their quarterly results.
For the week in full
The markets closed mixed Monday with the Dow Jones down -0.2% after having gained ground earlier in the trading day while the S&P 500 and Russell 2000 enjoyed slight gains, closing up +0.2% and +0.3% respectively. Volume was particularly light, with the 13th fewest shares traded on Monday for 2018.
The combination of Tuesday’s strong NFIB report and the record-setting JOLTS report, more on them later, on top of last week’s report on rising wages pushed the probability of two Fed rate hikes this year up to nearly 80% on Tuesday, which made for markets that just managed to close in the green, mostly thanks to calming in the trade wars.
In contrast, the Shanghai Composite Index and the Hong Kong’s Hang Seng closed Tuesday at 52-week lows, solidly in bear territory, down -25.1% and -20.3% from their January highs respectively. The MSCI Emerging Market Index is in definite correction, closing down -13% from its January high.
Wednesday the markets were again relatively unchanged, trading in a narrow sideways range, as the trade war tensions eased on the news that the Trump administration is reaching out to China for another round of discussions. The more trade-sensitive shares outperformed such as Boeing (BA) up 2.0%, and Caterpillar (CAT) up 2.6% the overall market, that day.
The US Treasury curve flattened further as the 2-year rose to 2.74%, with the spread between the 10-year and 2-year narrowing to just 21 basis points, near the flattest we’ve seen since 2007.
Thursday, the major indices gained ground on word that the Administration’s proposed new round of negotiations with the Chinese could prevent additional tariffs on $200 billion of Chinese imports. Also propping the market higher was the weaker than expected inflation reading in the August Consumer Price Index. That combination led the S&P 500 to gain +0.5% on the day, closing in the green for the fourth consecutive trading day and just one third of a percentage point below its all-time record close.
This week Brent Crude rose about $80 a barrel for the first time since May on news from the Department of Energy that the US experienced a 5.3 million barrel drawdown of crude oil inventories for the week, well above expectations for a 2 million decline. This coupled with Hurricane Florence on top of the sanctions on Iran helped push prices up. OPEC is expected to meet in Algeria later this month with a press conference to follow on September 23rd.
