The first full trading week of August was relatively quiet in economic news.
On Tuesday, the ISM Services PMI came in at 50.1, which was lower than the expected 51.5 and was also lower than last month’s 50.8. The final figure indicates that while demand for services is growing slightly, overall demand is trending down. For the last several years, demand for services has been fueling economic growth, causing inflation to remain elevated.
If demand for services slows, it may mean that inflation finally eases back to the Fed’s target of 2 percent. This may be a justification for cutting interest rates. However, slowing demand for services may also indicate an overall slowdown in consumer spending, which could be indicative of a potential recession.
It was also revealed this week that President Trump was leaning toward appointing Christopher Waller as the new leader of the Fed after Powell’s term ends in May. While the move has not been confirmed, he has met with Trump’s team, and his philosophy does mesh well with Trump’s. Waller has been one of the loudest voices in support of rate cuts, and it’s likely that the Fed would be more aggressive in easing policy if he were to take the job.
On Thursday, unemployment claim figures for the past week came out and revealed that 226,000 people requested benefits over the past seven days. That is higher than the expected 221,000 requests as well as more than the 219,000 requests last week.
Also on Thursday, President Trump said that there would be no negotiating the 50 percent tariff imposed on India for buying Russian oil.
The S&P 500 finished the week up 1,42 percent to close at 6,389. That represents an increase of 89 points over the past five trading days for a market trending steadily upward since April. Despite losing nearly 20 percent during the month of April, the index is still up nearly 16 percent over the past 12 months. On Monday, the market opened at its weekly low of 6,279 and closed the week near its weekly high.
The Dow was also up this week, closing 0.72 percent higher over the past five days. On Friday, the index closed at 44,175, which is near all-time highs for the market. Although the Dow has lost about 1 percent this month, it has appreciated about 12 percent since this time last year. On Thursday morning, the Dow made its weekly high of 44,422 before reversing and making a weekly low of 43,820 later that day.
Finally, the Nasdaq was up 2.65 percent to finish this week at 23,611, which was an increase of 608 points over the past five trading days. The index is now up 27 percent since this time last year, which is the best of the three major American markets.
In international news, Great Britain announced on Thursday morning that it would reduce its interest rate from 4.25 percent to 4 percent. The vote was 5-4 in favor of a cut, which is a level of dissent that is rarely seen from a central bank board. On Friday, Canada announced that its unemployment rate remained steady at 6.9 percent, despite its economy losing 40,000 jobs over the past month.
The upcoming week will feature several important data points, including the release of inflation figures on Tuesday and price change information on Wednesday. Retail sales figures will be released on Friday as well as the University of Michigan’s inflation expectation and consumer sentiment reports.