Stocks and Bonds Fall Despite Good Economic Data

Good morning,

The Dow (-0.1%), NASDAQ (-0.7%), and S&P 500 (-0.3%) fell for the week.  Similarly, taxable bonds fell 0.3% and tax-free municipal bonds fell 0.4%.  The 10-year Treasury yield rose 0.05% to finish the week at 4.18%.

Stocks and bonds fell, despite a slew of upbeat economic data.  Initial jobless claims fell to the lowest weekly reading since July, and the Fed-favored inflation gauge – Personal Consumption Expenditures (PCE) – came in line with expectations.  Durable goods orders (goods meant to last more than three years) rose 2.9%, far better than the expected decline of 0.3%.  Lastly, US economic growth for Q2 was also revised higher to 3.8%.  While one data point doesn’t make a trend, these data suggest that the economy is not weakening as much as some investors feared.  This may have partially fueled the “good news is bad news”, as investors may be questioning how aggressive the Fed will be to cut interest rates over the next year.  Further, the Fed commented that the stock markets are “fairly highly valued”, which likely led to profit-taking, driving stocks modestly lower.

The rubber meets the road this week, as Congress will continue to debate the federal budget, as the fiscal year end on September 30.  Yes, that is tomorrow, and if a deal isn’t made between parties in Congress, this could lead to a partial government shutdown.  In other words, the big political football game is in the final minutes, and the stakes aren’t low.  Am I the only one who finds this political stuff in Washington to be annoying?

Have a great day and terrific week!

^{Source:  Yahoo Finance}

^{Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.}

^{The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.}

^{The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.}