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10/18/2018
Market Update

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U.S. financial markets shuddered this week as investors dumped stocks and fled to less risky assets, such as bonds and gold. Economists blamed the rout on a number of factors, from accelerating trade-war tensions to rising interest rates. Yet experts noted that October is known for market volatility: during this month between 1950 and 2017, there were 362 instances of the S&P 500 Index moving higher or lower by at least 1 %.
This Week

  • U.S. financial markets shuddered this week as investors dumped stocks and fled to less risky assets, such as bonds and gold. Economists blamed the rout on a number of factors, from accelerating trade-war tensions to rising interest rates. Yet experts noted that October is known for market volatility: during this month between 1950 and 2017, there were 362 instances of the S&P 500 Index moving higher or lower by at least 1 %.
  • The CBOE Volatility Index (or VIX) exploded in response to the market decline, hitting its highest level since the February selloff. The VIX, also known as the "fear index," reflects expectations for volatility in the S&P 500 Index and often surges during periods of market uncertainty.
  • Producer prices expanded by 0.2% in September, primarily within transportation services. The report continued to convey a relatively benign producer-price environment with subdued underlying data. Steel and aluminum prices felt pressure earlier in the year from tariff effects, but were unchanged from the prior month.
  • Consumer prices inched up by 0.1 % in September. Year over year, core consumer-price growth was unchanged at 2.2%. Analysts noted that more than half of the monthly increase was supported by higher rents and home prices. The elevated cost of home ownership continues to weigh down the housing market.
  • Mortgage-purchase applications slid by 1 % in the week ending October 5, while refinancing activity (which can be sensitive to even small rate changes) dropped by 3%. Interest rates are approximately 1 % higher compared to last year, causing buyers to seek adjustable-rate mortgages.
  • Initial jobless claims expanded by 7,000 to 214,000 in the week ending October 6. The more stable four-week moving average rose by 2,500 to 209,500. Continuing claims declined by 10,000 to 1.66 million. Overall, the current-claims level remained low, which suggests a strong demand for labor. Economists noted that Hurricane Michael will likely impact the October jobs report.
  • Total import prices moved 0.5% higher in September on a rebound in energy prices, while export prices were unchanged. Excluding fuel, import prices were essentially flat for the month.
  • Industrial production in the U.K. grew by 0.2% in August, mainly within electricity and gas, water supply and mining, while manufacturing production slid by 0.2%. Prospects for economic growth in the U.K. have diminished in the face of Brexit-related uncertainty.
  • China's non-manufacturing purchasing managers' index improved in September, hinting at strengthening demand for the services sector. However, the nation's companies are beginning see deteriorating profit margins due to rising costs and weakening employment.
  • Industrial production in the eurozone rallied in August, improving by 1 %, reinforced by broad-based gains across all subsectors.

 

 

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