On Friday, the major indices ranged near their flat lines throughout the Friday session, ending little changed. The S&P 500 was up 0.1% and the NASDAQ increased 0.3%, pushing out slim gains while the Dow Jones Industrial Average underperformed, declining 0.1%, throughout the day. Despite the sideways action on Friday, the increase on Wednesday and Thursday allowed the S&P 500 to end the week higher by 0.9% while the NASDAQ jumped 2.5% for the week. With Friday being one of the last sessions remaining in August, the S&P 500 is on track to lose 5.8% for the month while the Nasdaq is down 6.2% since the end of July.
The early strength in the energy sector served as an encouraging factor and other sectors began climbing in sympathy shortly after the start. The advance briefly placed the S&P 500 above its flat line, but the index slid back down after the U.S. Federal Reserve vice chair Stanley Fischer appeared on CNBC.
Mr. Fischer's appearance did not provide that much fresh insight as he indicated that a September rate hike remains a possibility and that it's still too early to make the call right now. However, that was enough for the uncertain market to move back into negative territory.
The decline from highs was fairly broad-based and it pulled the energy sector from its high. Still the group ended with a solid gain while other sectors joined energy, with it heading up, during the final hour thanks to a broad surge that lifted the market back into positive territory. For the week, the energy sector jumped 3.7%, ending ahead of the technology sector, which spiked 2.9% for the week. The top-weighted group saw a stunning reversal after being down 6.9% at its lowest point on Monday.
Economic data was limited to Personal Income/Spending data and Michigan Sentiment. Personal income increased 0.4% for a fourth consecutive month in July while analyst expectations anticipated an increase of 0.4%. Wages and salaries increased 0.5% in July after increasing 0.2% in June, which was slightly weaker than what was implied in the July employment report.
Personal spending increased 0.3% for a second consecutive month in July, following an upward revision to June spending (from 0.2% to 0.3%). Analysts expected an increase of 0.4%. The University of Michigan Consumer Sentiment Index was revised down to 91.9 in the final July reading from a preliminary reading of 92.9 while the Briefing.com consensus expected a revision up to 93.0. The move in consumer sentiment was opposite of the trend in the Conference Board's Consumer Confidence Index, which spiked to 101.5, its highest level since January.
On Friday, it was announced that McDonald's cut ties with one of its chicken suppliers after an animal rights group obtained gruesome video footage that appears to show operators of the Tennessee poultry farm clubbing small and sickly birds to death.
The farm is a contractor for the mega poultry producer Tyson Foods which supplies chicken for McDonald’s, which is the second biggest purchaser of poultry in the USA. Tyson’s spokesman Worth Sparkman said the company was investigating the video, but “based on what we currently know, we are terminating the farmer’s contract to grow chickens for us.”
McDonald's said in a statement that the activity depicted in the video was unacceptable and expressed support for Tyson's decision to end the relationship with the supplier. They noted that they are working with Tyson Foods to further investigate this situation and reinforce their expectations around animal health and welfare at the farm level. As well, they felt committed to working with animal welfare and industry experts to inform our policies that promote better management, strong employee education and verification of practices.
Vandhana Bala, an attorney for Mercy for Animals, said the video was recorded recently by one of the group’s investigators who applied for a job at T&S and worked at the farm for about four weeks. During that time, she says the investigator witnessed more than 100 instances of abuse of the animals.
Mercy for Animals also says their investigator found that the birds were bred to grow so quickly that they became crippled by their own weight and often died from organ failure. The group also claims that the birds are crammed into sheds where they live in their own waste before being trucked on to the slaughterhouse.
All birds grown at the farm, which has a capacity of more than 120,000 birds, were transported to Tyson's processing facility in Union City, Tenn., a plant dedicated to making Chicken McNuggets and other chicken products for McDonald's, according to the group.
The video’s publication comes as America’s top burger chain has been involved in a sales slump and has attempted to bolster the image of its food. Late in 2014, McDonald’s posted on YouTube a behind-the-scenes video of one of five U.S. facilities where Chicken McNuggets are produced. The chain decided to lift the veil on how its chicken is made after repeatedly being asked by customers what their nuggets are made of. The chain has also gone to great effort to shake the perception of selling only junk food by offering mandarins in Happy Meals and introducing egg whites to its breakfast menu. Mercy for Animals has taken aim at suppliers of McDonald’s and other fast food chains in the past.
In 2011, McDonald’s and Target called on its U.S. egg supply chain manager, Cargill Inc., to end its relationship with Sparboe Farms in Litchfield, Minn. after Mercy for Animals published undercover video of farm workers swinging a chicken by a rope or chain and another of a worker shoving a hen in a co-worker's pants pocket. A 2012 video showing Idaho dairy workers abusing cows at a farm supplying Burger King led to criminal convictions. After the Idaho video, lawmakers in that state passed legislation banning undercover videos at factory farms.
In the week ahead, a range of economic data will be announced that is bound to spark movement in the markets. On Monday, August 31st – to close off the month – Chicago PMI data will be released. Then, on Tuesday, September 1st, motor vehicle sales will be announced. If motor vehicle sales are on the rise, this could cause an increase in the value of automotive stocks such as Tesla Motors and BMW. As well, a rise in motor vehicle sales could cause an increase in major market indices such as the S&P 500. On Thursday, September 3rd chain store sales and U.S. jobless claims will be announced. If chain store sales are declining, for example, stocks such as Abercrombie & Fitch could decrease in value. Additionally, indices such as the Dow Jones Industrial Average could decline in value as well. Then, on Friday, September 4th an announcement on the employment situation will be released. If employment is rising, this could cause market indices such as the S&P 500 and NASDAQ to rise in response.
U.S. markets experienced one of the most dramatic weeks that it has in recent years. The declining Chinese economy is really making a mark on a number of other economies across the globe. Hopefully, this decline will stabilize and the growth we’ve seen in U.S. markets and others around the world will continue to be present. At the very least, hopefully there will be some predictability in how major financial assets are moving in the weeks and months ahead.
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