The Market Week in Review - Week Ending Oct. 4, 2019

The U.S. stock market experienced little change over the week as earlier losses from poor ISM index data was mitigated by later-week jobs data. Interest rates moved lower with the 10-year treasury yield dropping from 1.69% last week to 1.52% today. Meanwhile the spread between the 10-year treasury yield and the 2-year treasury yield continues to widen after inverting in August as it currently sits at 0.12%. The price of gold rose a slight 0.46% to $1,510 an ounce amid a mix bag of economic data. The price of crude oil fell 5.79% to $52.89 a barrel amid poor manufacturing data and rise in inventories.

This Week's Economic Highlights

• Approximately one year ago the ISM manufacturing index was over 60% but has since dropped to 47.8% as manufacturers experience their biggest contraction since the 2008-2009 recession.(Readings below 50% indicate worsening manufacturing conditions.)The decline in the index reflects a slowdown in global economies and worsening trade between the U.S. and China.

• The ISM non-manufacturing index, a measure of service-orientated companies, dropped form 56.4% in August to 52.6% in September, its lowest reading in three years.Much like the ISM manufacturing index, the ISM non-manufacturing index has been falling from its high of 60.8% last year but still remains above 50%.  (Readings below 50% indicate worsening manufacturing conditions.)

• Initial unemployment claims rose by 4,000 to 219,000 for the week ending September 28^th.Meanwhile the more stable four-week average of initial claims was unchanged at 212,500.Continuing unemployment claims, which lags initial claims by a week, fell by a slim 5,000 to 1.65 million.Both initial and continuing unemployment claims remain near historic lows.

• The U.S. added 136,000 jobs in September, coming in below the expected 150,000.Despite the relatively low monthly increase in September, both August’s and July’s jobs numbers were revised upward for a combined 45,000.Meanwhile the unemployment rate dropped from 3.7% to 3.5% and the wage growths year-over-year rate fell from 3.2% to 2.9%.

Quote

“The market can only know what is knowable.  It can’t resolve uncertainties that are unresolvable.  So, when there is a large amount of economic uncertainty out there, there’s going to be a large amount of volatility in prices.”

 – Eugene Fama