Equities Finish the Week Lower as Rate Normalization Looms
August 17, 2015 — Stocks ended a volatile and choppy week positive, as investors reviewed the latest economic data and welcomed China’s first rise on the yuan since Tuesday’s surprise currency devaluation. The CBOE’s VIX volatility index surged over 12% on Tuesday, and investor temperament eased to end the week down a little over 4%. The yuan devaluation proved most challenging to emerging markets, with the MSCI Emerging Markets Index retreating 2.33% last week.
Tuesday’s retail sales report was among the most important U.S. economic data point last week, rising 0.6% in July while June was revised, from an initial reading of -0.3%, to that of unchanged. May retail sales were also revised to a 1.2% gain from 1%. Importantly, May and June revisions will likely point to an upward revision for 2Q GDP. Friday’s rise in industrial production also drew cheers, surpassing economists’ consensus forecasts with a gain of 0.6% versus 0.3% expected. Factory production, a sub-set of overall production, increased 0.8%, the strongest gain since last November. Also on Friday, the Producer Prices Index (PPI) increased at a 0.2% annualized pace, down from 0.4% in May.
For the week, the Dow Industrials rose 0.67%; the S&P 500 gained 0.73%; and the NASDAQ Composite returned 0.12%. All ten major sectors, within the S&P 500, advanced on the week, with Energy (+3.5%), Utilities (+2.66%) and Industrials (+1.29%) performing best. Consumer Discretionary (+0.12%), Healthcare (+0.09%) and Consumer Staples (+0.05%) rose the least. Gold prices rallied the most since June, with the S&P GSCI Gold Index advancing 1.7% last week, while the GSCI Crude Oil Index fell 1.95%. The ten year U.S. Treasury yield rose just two basis points during the week, ending at 2.20%.