For the week ending 8-11-17
Stocks had one of their worst weeks all year as tensions between the U.S. and North Korea reached a peak with North Korea saying it was targeting the water surrounding the U.S. territory of Guam and the U.S. replying that any such action would be met with overwhelming force. Earlier in the week intelligence assessments became public revealing that North Korea has likely acquired the technological capability of miniaturizing a nuclear warhead, making it deliverable by a missile.
Tensions seemed to ease somewhat on Friday and stocks responded with a small rally. Then, over the weekend, the U.S. Defense department and National Security Council each came out with separate statements emphasizing that a diplomatic solution to the situation was possible and that war with North Korea was not imminent. In response to these developments over the weekend, stocks have rebounded sharply during Monday morning’s session with all three major benchmarks up about 1 percent.
In other news, Job openings rose sharply in June, to 6.2 million, up from 5.7 million in May. Hiring, however, fell sharply, pointing to continued tightening of the labor market. Jobs are going unfilled as employers are experiencing increasing difficulty in finding enough workers with the right skills to fill positions. One of the places that this labor shortage is having the biggest impact is in housing. Despite the growing demand for affordable housing, the inventory of new homes on the market is critically low. Home builders point to a number of factors limiting their ability to bring more inventory to the market, including zoning restrictions and a lack of available land in the most desirable locations. But the biggest impediment to home builders currently is the lack of qualified carpenters, electricians, plumbers and other skilled occupations critical to their industry.
And finally, the Consumer Price Index rose 0.1% in July, less than consensus expectations. The year-over-year rate was also below consensus, advancing 1.7 percent, which is below the Fed’s target inflation rate of 2 percent. While the Federal Reserve Board has said it sees the recent decline in inflationary pressures as “transitory”, markets are not so sure. Bond traders drove the yield on the 10 yr. Treasury down to 2.2 percent and the price of Treasury options puts the chance of another rate hike before the end of this year at just 40%.
For the week, the Dow Jones fell 235 points to 21,858 (-1.1%); the NASDAQ lost 95 points to 6,257 (-1.5%); and the S&P 500 shed 36 points to 2,441 (-1.5%)
Oil was unchanged at $49.00/bbl. Gold rose $32 to $1,295/oz.
The yield on the 10 yr. Treasury ticked down 0.1 to 2.2%
Disclaimer: It is worth noting that the opinions in this commentary are Christian Peterson’s and may occasionally vary somewhat from the opinions of the Winch Financial investment team as a whole. Client recognizes that any opinions or analysis described in this commentary involve the Advisor’s judgment and good faith and do not constitute investment advice. All recommendations or observations are subject to various market, currency, economic, political and business risks. Client recognizes that no party to this alert has made any guarantee, either oral or written, that Client’s investment objectives will be achieved. Advisor shall not be liable for any action performed or omitted to be performed or for any errors of judgment or mistake, except in the case of Advisor’s gross negligence, willful misconduct, or violation of applicable law. Advisor shall not be responsible for any loss incurred by reason of any act or omission of Client, custodians, broker-dealers, or any other third party. Nothing in this commentary shall constitute a waiver or limitation of any rights that Client may have under applicable state or federal law, including without limitation the state and federal securities laws.