Markets: Worries about the crashing Chinese stock market and slowing Chinese growth sent world markets tumbling on Monday. (The Chinese market had been up 67% in 2015, and is now down for the year.) The DOW was down 1000 points at the open, amid rampant margin calls, which sent investors scrambling. Record amounts of cash were withdrawn from US Equity markets – $29.5B.
But then, the market reversed dramatically on Wednesday, with the DOW rising 4%, and the S&P gaining 3.9%, their best 1-day gains since 2011. A robust Q2 GDP gain of 3.7% lifted markets again on Thursday. Dovish Fed comments about a Sept. rate hike also helped to fuel the gains. Crude oil even caught a bid, with WTI futures up over 12% for the week.
Volatility: The VIX soared again this week, rising to above 40 on Monday, for the 1st time since 2011. After all of the turmoil, it settled at $26.10, down 7% for the week.
Currency: The strong GDP number helped to lift the US dollar against most major currencies this week.
Market Breadth: 17 out of 30 DOW stocks rose this week, vs. 0 last week. 53% of all S&P 500 stocks rose this week, vs. only 3% last week.
US Economic News: The 2nd estimate of 3.7% for Q2 GDP was a pleasant surprise, after a tepid 2.3% in Q1. Forecasters were looking for just 3.2%. Consumer Confidence hit its 2nd highest reading since the recession this week, at 101.5.
Week Ahead Highlights: The heavily-anticipated August Non-Farm Payrolls report will come out next Friday, and should provide more clarity about the strength of the U.S. economy. The Fed’s Beige Book may also reveal more about the Fed’s take on the US economy, and the timing of its 1st rate hike. Market turmoil may have served to dampen the Fed’s resolve to raise rates in September. Hmmmm…Does a Chinese slowdown = weaker 2nd half for US exporters? The week leading onto Labor Day is also historically one of the market’s slowest weeks of the year.
Next Week’s US Economic Reports:
Sectors and Futures:
Energy stocks led this week, as Utilities lagged.
Crude oil led, and cotton lagged.
