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A new
stock record (for a day) amid favorable
news
The week's reports were generally
favorable—the trade deficit shrank for
the third straight month, retail sales
increased,
and core producer prices rose only
modestly. The S&P 500 Index reached a
new high of 1,565 on Tuesday after
setting a record the week before, but it
wasn't sustained
as stocks ended the week lower. For the
week, the S&P 500 Index rose 0.3% to
1,562 (for a year-to-date total return
of 11.5%). The yield of the 10-year U.S.
Treasury note rose 1 basis point to
4.65%.
U.S. balance
of trade improves for third straight
month
The U.S. trade deficit—the excess of
imports over export—narrowed in August
to $57.6 billion from $59 billion in
July, the third straight month of
improvement. Aided by a weakening dollar
that made U.S. goods and services more
competitive abroad, exports grew for the
sixth straight month. Imports declined
for the first time since April, despite
increased petroleum imports.
Federal Reserve's rate
cut focuses on risks to growth
The Federal Reserve Board's Open Market
Committee (FOMC) released minutes of the
September 18 meeting that preceded its
federal funds rate cut later that day .
The minutes said that the FOMC, although
still wary of inflation, cut the rate
due to concern that a growing credit
crunch and a troubled housing market
could curb economic growth. Although the
board did not discuss future rate cuts,
some investors apparently felt it had
not ruled them out, and this
precipitated Tuesday's short-lived
stock-market rally.
Excluding food and
energy, producer prices increase
modestly
The Producer Price Index (PPI) for
finished goods, a major gauge of
manufacturing commodity prices and a
leading indicator of consumer prices,
rose a greater-than-expected 1.1% in
September after declining in August. The
price boost came primarily from higher
costs for food and energy. Once these
factors were excluded, core PPI
increased a relatively modest 0.1%half
the August rate.
Retail sales grew
stronger than expected in September
Consumer spending at the retail level
surprised analysts by jumping 0.6% in
September, which was more than the
expected 0.4% increase. They attributed
the increase to one-time factors,
primarily higher sales of autos (which
didn't seem to square with a drop in
unit auto sales) and gasoline. Excluding
gas and autos, sales grew only 0.2%, in
line with an overall trend toward modest
consumer spending, the major component
of gross domestic product.
Inventories show only
slight growth in August
Total business inventories grew 0.1% in
August, below expectations and down from
an increase of 0.5% in July. Inventories
fell –0.1% at manufacturing companies
but rose 0.1% at wholesalers and 0.5% at
retailers. The inventory/sales ratio
inched up to 1.27. |
