The markets this week were much more volatile, with a bad start to the week being mostly erased by a good finish. The S+P 500 dropped a little less than 0.5% this week and the Dow Jones was off about 1%. The big mover was the bond market with the 10 year treasury dropping 1.68% to 1.52%.
The week started poorly with a bad reading on the manufacturing index. The expectation was for neither growth nor decline, but the actual reading came in showing the worst reading in about ten years, signaling a shrinkage of new orders. The mid-week unemployment data was slightly lower than expected, but not too dire. The big news came on Friday when the unemployment rate unexpectedly dropped to 3.5%, the lowest rate since 1969.
Next week we are looking forward to job opening data, wholesale inventories, inflation data, and the consumer sentiment index. Those data will let us keep an eye on the general state of the economy, and my big fear, that of inflation. With such a low unemployment rate, inflation could show up, and that would mean the likelihood of further fed rate cuts would shrink significantly.
~ Alex Parrs
