Market Perspective for August 28, 2017

The Nasdaq and Russell 2000 gained on Monday, but energy and insurance weighed on the market as traders reacted to Hurricane Harvey. Crude oil prices tumbled, while gasoline prices rose after estimates of Texas refinery downtime increased.

Healthcare subsectors registered solid gains, with some biotechnology funds up more than 2 percent on the day. Gilead Sciences (GILD) announced a buyout of Kite Pharma (KITE), sending shares of both companies higher on the day.

The Conference Board’s August consumer confidence survey will be out on Tuesday and the University of Michigan’s survey on Friday. Both are expected to rise.

The revised estimate of second-quarter GDP growth will be released on Wednesday. Economists expect the government will report 2.8 percent growth, up from the initial 2.6 percent estimate.

Personal income, consumer spending, core inflation and pending home sales for July will be out on Thursday. Forecasts call for substantial increases of 0.4 percent in both income and consumer spending. In June, income was flat and consumer spending rose only 0.1 percent.

Friday will bring the monthly employment report. Economists predict 175,000 new jobs were created in August. Unemployment is expected to hold steady at 4.3 percent. August manufacturing PMIs are forecast to rise. Analysts see July construction spending rising 0.5 percent, up from a decline of 1.3 percent in June. August motor vehicle sales are expected to decline 0.1 million from June’s annualized pace of 16.7 million. Various manufacturing PMIs, Japanese retail sales, Canadian GDP growth and inflation in the Eurozone will also become available at the end of the week.

Interest rates were down modestly on Monday. The 10-year Treasury yield fell to 2.16 percent, its lowest level since late June. The low for the year is 2.10 percent. Traders tend to position around these levels looking for a break or reversal in the trend. With several key economic reports this week, we could see higher volatility in the bond market.

Earnings season is all but complete, but a few firms have yet to report. Some of the largest this week are Best Buy (BBY), H&R Block (HRB), Analog Devices (ADI), (CTRP), Workday (WDAY), Dollar General (DG), and Campbell’s Soup (CPB).

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