U.S. stock market closed higher as technology stocks pushed up the indexes and investors continued to assess the tax reform framework released by the GOP.
The Dow Jones industrial average rose 23.89 points (0.11%) to close at 22,405.09, as Goldman Sachs contributed the most gains. The S&P 500 closed at a record high and was up 9.30 points (0.37%) to settle at 2,519.36, driven by technology stocks. Nasdaq composite jumped 42.51 points (0.66%) to finish at 6,495.96. For the week as a whole, all three U.S. stock indexes closed in the green with Nasdaq outperforming the others.
On Tuesday, U.S. consumer confidence in September dropped to 119.8 (vs. 120.4) in response to the adverse impact from Hurricane Harvey and Irma. The reading remained elevated nonetheless. In addition, U.S. new home sales continued to weaken for the similar reason mentioned above. The August figure dropped 3.4% to an annual rate of 560,000 units (vs. 580,000 in July), while tight supply received some relief and volume of homes for sale indicated a supply of 6.1 months, up 7% from July.
On Wednesday, U.S. August pending home sales fell 2.6% (vs. -0.8% in July) to a reading of 106.3, below street expectations of a 0.5% decline, as demand continued to outstrip supply. This marked as the worst drop since January 2016.
In addition, President Donald Trump unveiled a revised tax reform proposal (source: Axios). The framework for individuals points to collapsing seven existing tax brackets to three (12, 25, and 35%), repealing the estate tax, and doubling the standard tax deduction to $12,000. For businesses, the framework is looking to reduce corporate tax rate to 20% (from 35%), implement one-off levy on offshore earnings, and scale back taxation of companies’ earnings outside of U.S. Here is an interesting analysis of proposed tax reform framework (source: marketwatch).
On to Canada, Bank of Canada (BoC) Governor Stephen Poloz offered a similar comment as its U.S. counterpart, stating interest rate policy will be data dependent going forward. As a result, the loonie dropped after the announcement as the odds of another rate hike for the remainder of the year receded, while the 10-year government bond yield remained relatively stable.
Source: CBC, WSJ
On Thursday, Japan continued to see both its consumer price index (CPI) and core CPI strengthen in August, with the former coming in at 0.7% YoY (vs. 0.4% in July) and the latter registering a 0.2% growth YoY (vs. 0.1% in July). On the other hand, the nation’s unemployment rate remained unchanged at 2.8% in August. Despite the seemingly robust economic activities and an increasingly tight labor market, inflation measures remained substantially below Bank of Japan (BoJ)’s 2% target inflation.
On Friday, Canada reported its GDP data in July, which came in flat at 0% MoM (vs. 0.3% in June), as the oil and gas, mining, and manufacturing industries took a pause. The slowdown in housing market has likely contributed to the soft reading.
Further, China reported strong official manufacturing purchasing managers’ index (PMI) result in September, rising to 52.4 (vs. 51.7 in August), the highest level since May 2012. The growth was mostly driven by production and new orders sub-indices.
On the other hand, a similar indicator, Caixin manufacturing PMI, slipped to 51.0 in September (vs. 51.6 in August), pointing to a slower growth in the level of activity.
Note that: The official PMI samples 3,000 manufacturing enterprises in China, while the Caixin PMI focuses on about 500 manufacturers and is relatively volatile due to its small sample size and less emphasis on large enterprises.
The week ahead: Both the U.S. and U.K. will release their September Manufacturing PMI results on Monday (Oct 2); Both aforementioned countries will report their services PMI figures and U.S. will publish its ADP non-farm payroll result on Wednesday (Oct 4); European Central Bank (ECB) will release its September meeting minutes on Thursday (Oct 5); U.S. will report its September non-farm payroll figure and unemployment rate, and Canada will release its unemployment data on Friday (Oct 6).
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AMJourney 
Market Commentary – September 29, 2017
U.S. stock market closed higher as technology stocks pushed up the indexes and investors continued to assess the tax reform framework released by the GOP.
The Dow Jones industrial average rose 23.89 points (0.11%) to close at 22,405.09, as Goldman Sachs contributed the most gains. The S&P 500 closed at a record high and was up 9.30 points (0.37%) to settle at 2,519.36, driven by technology stocks. Nasdaq composite jumped 42.51 points (0.66%) to finish at 6,495.96. For the week as a whole, all three U.S. stock indexes closed in the green with Nasdaq outperforming the others.
On Tuesday, U.S. consumer confidence in September dropped to 119.8 (vs. 120.4) in response to the adverse impact from Hurricane Harvey and Irma. The reading remained elevated nonetheless. In addition, U.S. new home sales continued to weaken for the similar reason mentioned above. The August figure dropped 3.4% to an annual rate of 560,000 units (vs. 580,000 in July), while tight supply received some relief and volume of homes for sale indicated a supply of 6.1 months, up 7% from July.
On Wednesday, U.S. August pending home sales fell 2.6% (vs. -0.8% in July) to a reading of 106.3, below street expectations of a 0.5% decline, as demand continued to outstrip supply. This marked as the worst drop since January 2016.
In addition, President Donald Trump unveiled a revised tax reform proposal (source: Axios). The framework for individuals points to collapsing seven existing tax brackets to three (12, 25, and 35%), repealing the estate tax, and doubling the standard tax deduction to $12,000. For businesses, the framework is looking to reduce corporate tax rate to 20% (from 35%), implement one-off levy on offshore earnings, and scale back taxation of companies’ earnings outside of U.S. Here is an interesting analysis of proposed tax reform framework (source: marketwatch).
On to Canada, Bank of Canada (BoC) Governor Stephen Poloz offered a similar comment as its U.S. counterpart, stating interest rate policy will be data dependent going forward. As a result, the loonie dropped after the announcement as the odds of another rate hike for the remainder of the year receded, while the 10-year government bond yield remained relatively stable.
On Thursday, Japan continued to see both its consumer price index (CPI) and core CPI strengthen in August, with the former coming in at 0.7% YoY (vs. 0.4% in July) and the latter registering a 0.2% growth YoY (vs. 0.1% in July). On the other hand, the nation’s unemployment rate remained unchanged at 2.8% in August. Despite the seemingly robust economic activities and an increasingly tight labor market, inflation measures remained substantially below Bank of Japan (BoJ)’s 2% target inflation.
On Friday, Canada reported its GDP data in July, which came in flat at 0% MoM (vs. 0.3% in June), as the oil and gas, mining, and manufacturing industries took a pause. The slowdown in housing market has likely contributed to the soft reading.
Further, China reported strong official manufacturing purchasing managers’ index (PMI) result in September, rising to 52.4 (vs. 51.7 in August), the highest level since May 2012. The growth was mostly driven by production and new orders sub-indices.
On the other hand, a similar indicator, Caixin manufacturing PMI, slipped to 51.0 in September (vs. 51.6 in August), pointing to a slower growth in the level of activity.
Note that: The official PMI samples 3,000 manufacturing enterprises in China, while the Caixin PMI focuses on about 500 manufacturers and is relatively volatile due to its small sample size and less emphasis on large enterprises.
The week ahead: Both the U.S. and U.K. will release their September Manufacturing PMI results on Monday (Oct 2); Both aforementioned countries will report their services PMI figures and U.S. will publish its ADP non-farm payroll result on Wednesday (Oct 4); European Central Bank (ECB) will release its September meeting minutes on Thursday (Oct 5); U.S. will report its September non-farm payroll figure and unemployment rate, and Canada will release its unemployment data on Friday (Oct 6).
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A small potato working on Bay Street