John Hancock: Weekly market Recap Week Ended August 15

Mixed consumer signals

U.S. retailers recorded a 0.5% month-over-month sales gain in July, matching economists’ consensus forecast but trailing the prior month’s upwardly revised figure of 0.9%. A separate report on Friday showed a weakening of U.S. consumer sentiment for the first time in four months and an increase in consumers’ inflation expectations.

Inflation conundrum

Two reports presented a mixed picture of elevated inflationary pressures at the consumer and wholesale levels. The Consumer Price Index showed that inflation held steady at a 2.7% annual rate in July, even as higher tariffs appeared to boost prices at faster rates for some categories of goods. While that consumer report was in line with expectations, producer prices reflecting business costs recorded a bigger-than-expected 3.3% increase—the sharpest rise in five months.

Rate cut outlook

Bond market trading on Friday continued to support recently growing expectations that the U.S. Federal Reserve is likely to cut its benchmark interest rate at its two-day meeting ending September 17. Prices in rate futures markets implied that most investors were expecting this year’s first quarter-point rate cut at next month’s meeting, with the prospect of one or two further cuts in October and December, according to CME Group’s FedWatch tool.

Fed’s summer agenda

Investors and economists will turn their attention to the Rocky Mountain town of Jackson Hole, Wyoming, where the U.S. Federal Reserve will hold its annual three-day economic policy symposium beginning Thursday, August 21. Fed Chair Jerome Powell is among the featured speakers, with an address scheduled on Friday.

SOURCE: https://www.jhinvestments.com/weekly-market-recap#market-moving-news