The S&P 500 broke the 2900 mark this week after a stellar earnings season. Second quarter corporate earnings, fueled by the tax cut and a stronger economy, increased by 16.1% from the prior year. Mexico and the U.S. reached a preliminary agreement regarding a deal to replace NAFTA. Despite hopes that Canada would join the agreement by the end of the week, nothing had been finalized by Friday afternoon. Argentina’s peso plummeted this week, another victim of dollar strength and declining global exports. The nation also mourned the loss of Senator John McCain this week. The war hero and former presidential candidate was known for blazing his own path and a passion for service.
Large and small cap stocks rose on solid earnings and international stocks seesawed on the continued trade tensions and emerging market currency declines. At the close on Friday, the MSCI EM index of currencies was down 2.2% for the month of August. The Treasury yield curve flattened this week as rates five years and up declined. Typically declining rates have an inverse relationship with bond prices; however, the overall bond market declined slightly as investors demanded higher yields from corporate bonds which carry greater risk. Investors will continue to eye the yield curve closely for any signs of inversion as the Fed continues its path to normalizing rates.
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