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It was a turbulent week for U.S. equity markets, with Chinese economic fears playing on investors’ minds. News that officials had cut interest rates, coupled with the borrowing of another RMB1.4 trillion, stabilized the Shanghai Composite on Friday, with the index closing 4.81% higher. In the last two months, Chinese officials have invested over $180 billion-$200 billion in the equity market.
Dropping 1,000 points on the open due to Chinese slowdown fears, the Dow Jones recovered mid-session before selling off to close down 3.58%. European and Asian markets were not so forgiving for investors, with the CAC falling 5.35% and Tokyo closing 4.61% lower.
Cuts to Chinese interest rates, coupled with short covering, pushed the indexes higher on Tuesday, with the Nasdaq rallying 2.4% in the afternoon. On the economic front, New Home Sales came in at 507,000, which was slightly below initial estimates of 511,000. Consumer Confidence for August, however, exceeded forecasts of 93.1, with 101.5 posted for the period.
Comments from NY Fed President Dudley comforted investors on Wednesday, with the major U.S. indexes finishing in the black. Hinting that interest rates may not go up in September, the Fed official cited current market conditions as the reason behind a possible monetary policy delay. In other economic news, Durable Orders for July came in at 2.0%.
Posting its largest two-day rise since 2008, the Dow Jones reacted to strong U.S. economic news, with the index finishing at 16,654 (up 2.27%). The 3.7% rise in Gross Domestic Product in Q2 was above the initial forecast of 3.1%. In other economic news, Pending Home Sales rose 0.5% in July.
Mixed start to the Friday session, with investors looking to take a breather after a volatile week. Central bankers will take center stage over the weekend, with the Jackson Hole summit set to conclude on Saturday. The July Personal Expenditure figure of 0.3% is expected to be a sticking point for Fed officials. Consumer Sentiment for August fell to 91.9 from 92.9 and Personal Spending remained flat at 0.3%.
Next week will see earnings reports from: Bob Evans Farms (BOBE), Donaldson Company (DCI ), H&R Block (HRB ), Qiwi Plc (QIWI ), Science Applications International Corp. (SAIC ), Shoe Carnival Inc. (SCVL ), ABM Industries (ABM ), Culp Inc. (CFI), Oxford Industries (OXM ), Campbell Soup (CPB ), Cooper Companies (COO ), Greif Inc. (GEF ), Hooker Furniture (HOFT ), Joy Global (JOY), Medtronic Inc. (MDT ), Methode Electronics (MEI ).
The following economic data will also be reported: Chicago PMI on Monday; ISM Index, Construction Spending, Auto & Truck Sales on Tuesday; ADP Employment Change, Productivity, Unit Labour Costs, Factory Orders and the Fed Beige Book on Wednesday; Initial Claims, Trade Balance, ISM Services on Thursday; Non-Farm Payrolls, Unemployment Rate, Hourly Earnings, and Average Workweek on Friday.