A Happy Labor Day Weekend to all, and while volume was light, we closed out Friday positive. Bulls were hoping for new highs for the major indices to close out the week, but that was not to be the case. It was still a decent week, though, and as for the for the major indices, the Nasdaq gained 2.7%, the S&P 500 rose 1.4%, and the Dow rose by 0.8%. Investors were looking for reasons to head higher, but we are still getting lackluster economic numbers that keep the bullishness subdued for the time being.
The government jobs number came in for August at 156,000, and while that was below estimates of 170,000 and below July’s 189,000, it still was not that bad of a number. August is one of those months that has revisions and corrections, so a slip was to be expected. Investors did not shrug that much, which was a good sign for the bulls. It was not a great number, but it was solid enough to say that the broader employment picture is still holding up relatively well.
The final August University of Michigan Consumer Confidence number was 96.8, and that was below the previous 97.6 and below expectations of that same 97.6 number. Once again, we are getting economic numbers that fall a bit short of expectations, but not far enough to rattle the stock market. Good, but not great, continues to be the theme in terms of economic reports, but we have a very patient stock market hovering near all-time highs. If we can continue to hold these current levels, any good news will likely give the “green light” for stocks to head higher.
The strange development is that with the Federal Reserve hinting at one or two more rate hikes this year, the yield on the 10-year U.S. Treasury is down to 2.16%, which is down from around the 2.4% level in early July. Low rates are great, but the Fed seems to want inflation and rates in general, higher, but it is simply not happening. This low yield means that capital is seeking safe havens, and that is an issue the Fed will deal with as it looks toward as it mulls additional rate hikes later this year.
As for the political landscape, the push from the Trump Administration to implement tax cuts or tax reform could be a single issue that might get pushed though and passed by Congress. It is political at this point, but the stock market might react positively to this push. Tax cuts were a big part of the bounce we saw early this year, and any progress on this issue could be very bullish for the broader stock market. Washington is Washington, though, and this might be a tough issue to get done quickly.
Investors are once again feeling fearless, and we saw that on Friday as the Volatility Index (VIX) dipped back down to 10.13. We saw spikes in August that signaled increased fear levels, but we are back to levels that signal a lack of fear. Some technicians say that this is a worrisome sign, but the VIX is back down to levels that say “all is clear.” This fearlessness is a great way to head into September, but it is still something to keep in mind. September and October are historically tough months, so we will see what happens.
We had a good week overall, though, and that was a great way to head into the three-day weekend. The Gorilla wishes each and all a relaxing weekend, and we will be back in action on Tuesday. The stock market is in a good position, and it seems as though we just need to see some good news to send the market higher. September usually is challenging, so be ready for anything. Again have a wonderful weekend!
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