Last week’s economic data and Fed speak were supportive of equity market prices, as stocks advanced for the second consecutive week. August employment data showed a strong, but not overheating economy. The U.S. added 130,000 new jobs for the month, which was both lower than estimated and lower than the trend for the last year. The unemployment rate stayed the same at 3.7%, while average hourly earnings increased by 3.2% over the past year. Several other key indicators showed strain in the manufacturing side of the economy, but continued growth elsewhere. In my opinion, this mixed data supports the Federal Reserve easing in September and then holding off on further reducing interest rates for the rest of 2019.
This week, I will be watching two items, in particular. The August retail sales report, which should show a continued robust consumer, and the results of the European Central Bank meeting, which has the chance to shed more light on central bankers’ thinking surrounding negative interest rates and nontraditional monetary policy measures. Without a catalyst, stocks should continue to grind higher and interest rates should rise modestly.
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