As the Western states struggle with wildfires and the Southeastern states get pounded by hurricanes, the stock market quietly made new highs. The S&P rallied this week 1.4 percent, closing in on the psychologically important 2,500. Conversely, bonds felt the swing into equities with rates on the 10-year U.S. Treasury rising 13 basis points to 2.20 percent.
The passing of Hurricane Harvey and the imminent landfall of Irma failed to rock the boat for equities, which remain near all-time highs despite puts and takes amid industries being impacted by severe weather events. More remarkable than trade posturing in home improvement and insurance stocks is the observation that benchmark interest rates and the dollar continue to slide.
Stock markets were higher this week, despite Hurricane Harvey and a weaker-than-expected jobs report. The S&P 500 was up 1.5 percent, ending the week close to the all-time high of 2,480 from early August. Bond yields slid slightly lower, with the benchmark 10-year Treasury yield dipping to 2.14 percent. August’s nonfarm payrolls report showed a gain of 156,000, which was below the expected 180,000 jobs.
For the week, the equity markets were down more than 1 percent as investors followed political events in Washington D.C. While the markets have been mostly focused on the global surge in earnings growth this year, political drama took center stage this week as there are concerns that the current administration will be unable to successfully enact tax reform and deregulation.
Headlines screaming, “fire and fury,” and “ballistic rockets are on constant standby,” could have surely warranted a multi-percentage sell-off. Fortunately, the market’s reaction was somewhat muted, falling just over 1 percent for the week. Historically, North Korean headlines have had minimal impact on the stock market. In 2006, when they detonated their first nuclear device, U.S. stocks were actually up.