The Markets
With the exception of the small caps of the Russell 2000, equities continued to slump on low trading volumes. The S&P 500 remained tantalizingly close to its year-to-date high, and the Dow and Nasdaq were only a little over 1% away from hitting theirs. Meanwhile, the Global Dow benefitted from last month's promises that the euro would be preserved at all costs. Oil and gold ended the month higher, helped by a somewhat weaker dollar.
Last Week's Headlines
- The U.S. economy grew at an annual rate of 1.7% in the second quarter rather than the 1.5% previously estimated by the Bureau of Economic Analysis. That's slightly higher than previously thought, but also slightly lower than Q1's 2%. Corporate after-tax profits were up 1.1% from the previous quarter, and up 3.3% from a year ago.
- Consumer spending, which accounts for 70% of the U.S. economy, was up 0.4% in July after falling in June and being flat in May. According to the Commerce Department, it was the biggest increase since February. Unfortunately, the spending increase outpaced gains in income, which rose 0.3% for the third consecutive month. As a result, the savings rate edged downward to 4.2% of income after reaching a year-long high the month before.
- June was the second straight month of higher sales prices for new homes; the 2.3% gain in the S&P/Case-Shiller 20-city index, which followed a similar gain in May, left it 6% higher than the recent low seen in March. Though the index is still more than 30% from its 2006 peak, all 20 cities in the index saw increases, which ranged from Charlotte's +1% to Detroit's +6%. Even better, the year-over-year change in the index (+0.5%) was positive for the first time in almost two years.
- Federal Reserve Chairman Ben Bernanke defended the Fed's quantitative easing measures and said the Fed is ready to do more if needed. However, he stopped short of promising to supply additional measures at the Federal Open Market Committee's September 13 meeting.
Eye on the Week Ahead
Light summer trading volumes will likely increase as traders begin to position themselves for the end of the quarter. Unemployment data will likely get extra attention because its release date is so close to the next FOMC meeting, and the European Central Bank's September 6 action on interest rates could be of interest.Key dates and data releases: U.S. manufacturing sector, construction spending (9/4); labor productivity/costs (9/5); U.S. services sector, European Central Bank meeting (9/6); unemployment/payrolls (9/7).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
