Higher, but Quietly (Again)

U.S. equities finished last week and the first trading day of September with a gain Friday, on expectations that a weaker-than-expected rise in August nonfarm payrolls could dull the Federal Reserve’s desire further to raise borrowing costs in 2017. Small caps outperformed large caps for the week and foreign stocks generally outperformed domestic names. Trading was very light all week ahead of the Labor Day holiday weekend, but the S&P 500 did see its first four-day winning streak since July. The European, Asian and gold markets all were higher last week.

 

On Friday, the Bureau of Labor Statistics announced a weaker than expected jobs gain for August with prior month revisions subtracting even more jobs. The unemployment rate rose to 4.4 percent. This disappointing report probably won’t halt the Federal Reserve’s plans to begin reducing its balance sheet soon, perhaps later this month. However, the chances of a December rate from the Fed dropped to 42 percent, according to CME Group fed funds futures. U.S. factories ramped up in August to the fastest pace of expansion in six years, driven by employment gains, figures from the Institute for Supply Management showed, and consumer sentiment climbed to a three-month high amid an improving outlook for household finances and the economy, according to a University of Michigan report.

 

Construction spending unexpectedly declined in July. Sector spending fell 0.6 percent, compounding a 1.4 percent drop in June. Analysts anticipated an increase of 0.6 percent. Private construction dipped 0.4 percent, while public construction slumped 1.4 percent. Oil prices were erratic but mostly lower last week as traders assessed the impact of Hurricane Harvey on drilling and refining activity in the Texas/Louisiana area. Harvey has forced the shutdown of some major refineries along the Gulf Coast. According to some estimates, about a quarter of the U.S. refining industry was shut down.

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