The second full week of September featured several news releases that will help shape the narrative around what the Fed might do during its meeting on Sept. 22. On Wednesday, it was revealed that the Core Consumer Price Index (CPI) rose by .3 percent on a monthly basis while inflation including food and energy prices rose by .6 percent on a monthly basis in August. The inflation rate was 3.7 percent on a yearly basis, and all three inflation measures came in higher than analysts expected prior to their release.
On Thursday, it was revealed that both core and traditional retail sales were up .6 percent for the previous month. The Price Producer Index (PPI) for the month of August also went up by .7 percent, which was higher than the .4 percent predicted in the days prior to the report’s release.
In addition, unemployment claims data was released, and it was revealed that 220,000 claims were filed. This was higher than the number of claims filed last week but still lower than the 226,000 expected by analysts. Higher energy prices were cited as the reason for the increase in inflation while the rising costs of goods and services were cited as the reason for the increase in overall prices and retail sales.
On Friday, the Empire State Manufacturing Index was released and came in at 1.9, which was much higher than the -9.9 that was expected. It was also significantly higher than the -19 reported last month. What this means is that there was an expansion in the manufacturing sector relative to the previous month as opposed to a continued contraction.
Finally, Friday saw the release of the University of Michigan Consumer Sentiment and Inflation Expectations reports. Consumer sentiment came in at 67.7, with inflation was expected to be at 3.1 percent at this time next year. However, as this was merely preliminary data, there is a good chance that the actual figures will vary when released later in the month.
Taken as a whole, the news suggests that the economy is still growing and that it may be too early to consider an end to rate hikes. While it’s still likely that the Fed decides not to hike rates when it meets next week, Fed Chair Jerome Powell has said that future decisions will depend on the data. There is a belief that the Fed will telegraph the possibility that the next hike will be the last one in the current cycle during the press conference also scheduled for Wednesday afternoon.
The S&P 500 was contained within a tight range on Monday, Tuesday and Wednesday before breaking out on Thursday. On Thursday afternoon, the market made a high of 4,509 before reversing to finish at 4,450 at the end of trading Friday. That represented the low of a week in which the market finished down .84 percent.
The Dow 30 was down .34 percent this week finishing at 34,618. Like the S&P, it spent most of the week in a consolidated range making a low of 34,540 on Wednesday and a high of 34,941 on Thursday. For the year, the Dow is up 11.48 percent and is within 1,000 points of its 52-week high.
Finally, the Nasdaq was down 178 points this week, which was a loss of 1.28 percent over the last five trading days. The market finished the week at 13,708, which was slightly higher than the low of 13,704 that was made on Friday morning. As with the other two major indices, the Nasdaq would make its weekly high on Thursday at 13,951.
Treasury bond yields were up across the board this week as markets digested the myriad of news releases. The rate for the two-year Treasury bond is currently 5.03 percent while the 10-year bond is sitting at 4.29 percent. Tracking bond yields can be an effective barometer of where the Fed may be going as they often serve as an indication of where rates are heading during a given time period.
The upcoming week is going to be a significant one for traders and investors alike. Of course, the main event is that Fed’s rate decision that will be released at approximately 2 p.m. on Wednesday. Thursday will see the release of unemployment claims while Friday sees the release of Manufacturing PMI and Services PMI figures.