Weekly Economic Summary - 10/8/2018Submitted by Miller Financial Group, LLC on October 8th, 2018
U.S. stocks are trending negative again this morning as investors are reacting to rising interest rates. Both the Dow and S&P500 closed out last week down -0.7% and -0.6% respectively. It was the second straight weekly decline for the S&P500.
Higher interest rates over the past several sessions has been the main driver in the pullback of stocks. Last week saw the yield on the 10-year U.S. Treasury note rise 17 basis points to 3.23% - the highest level in 7 years. Higher yields lead to steeper borrowing costs for corporations and investors. Additionally, this environment can lead to a shift out of risky investments such as stocks into higher yielding fixed income.
Economic data continues to show strength. The jobs report, which was released last week, showed a strong labor market. The unemployment rate came in at 3.7% - a 49 year low, while the jobs number failed to meet expectations due in large part to the impacts of Hurricane Florence. It’s a relatively quiet economic calendar this week, although Wednesday’s release of inflation data will be highly scrutinized.
In news around the world, investors are watching closely a potential clash between the European Union and Italy. The EU raised concern in a letter on Friday to Italy’s economic minister, Giovanni Tria, that Italy’s budget targets are a source of concern for the trading bloc. Global trade tensions between the US and China also remain front and center.
Have a great week!