The holiday-shortened week ended with losses for both US equities and Treasuries. Apple shares tumbled on the news that the Chinese government would ban the use of the iPhone at government agencies at all levels of government. The news comes in front of Apple’s new product release scheduled for September 12th. Shares of Apple fell 6% on the week and other large-cap technology issues fell in tandem. The ban on exporting technology to China may well have entered into a new phase with China taking similar measures against other multinational companies. The consequences of protectionism and on shoring were prominent themes for investors last week and will likely be another variable for investors to consider.
Oil prices advanced again on the news that Russia and Saudi would continue to curtail their production of Crude through at least the end of the year. The higher level of fuel costs has caused concern on the inflation front. The US Consumer Price Index will be released this week and it’s widely expected that the headline number will tick higher from the prior reading due to elevated oil prices. ISM Services reported during the week also showed that the services sector of the economy expanded at a higher rate and the prices in services ticked higher as well. Sticky inflation data and an increase in the supply of debt coming to the market from the Treasury and Corporate America pushed yields higher across the curve. This week the Treasury will auction off nearly 100 Billion in 3-year, 10-year, and 30-year paper.
The S&P 500 lost 1.3%, the Dow gave up 0.7%, the NASDAQ fell 1.9%, and the Russell 2000 led declines with a loss of 3.6%. Of note, the S&P 500 fell below its 50-day moving average but was able to hold 4400 a key level that investors will continue to watch. The yield curve shifted higher across the curve. The 2-year yield increased by nine basis points to 4.97%, as the 10-year yield rose by the same amount to 4.26%. Oil prices increased by $1.92 or 2.2%, closing at $87.47 a barrel. Gold prices fell by $23.80 to close at $1943.30 an Oz. Copper prices fell 3.3% to 3.72 a Lb. The US Dollar continued to be strong despite intervention measures from the Bank of Japan and the People’s Bank of China. The Dollar/Yen closed at 147.87, the Euro/Dollar closed the week below 1.07, and the Dollar/Yuan closed at 1.3667.
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