The Markets
Domestic equities seemed to shrug off a massive downward revision to
first-quarter GDP and mostly ended the week flat. Though the Nasdaq's
gain was slight, it was the sixth positive week out of the last seven.
Meanwhile, the benchmark 10-year Treasury yield remained low as demand
from bond investors continued to support prices.
Last Week's Headlines
- The U.S. economy contracted at a much
faster pace in Q1 than anticipated, falling 2.9% (not the 1% recently
estimated). The Bureau of Economic Analysis said its unusually steep
downward revision of gross domestic product was caused not only by
winter weather but also by exports and health-care spending that were
both lower than previously thought.
- The housing market rebounded strongly
in May from its winter slump. According to the Commerce Department,
sales of new single-family homes leaped 18.6% in May and were almost 17%
better than a year earlier. Also, the National Association of Realtors®
said the 4.9% increase in resales of existing homes was the biggest
monthly gain in nearly three years. However, the NAR also said existing
home sales were 5% lower and the number of unsold homes was 6% higher
than in May 2013.
- Data on April home prices also was
mixed. Cities in the S&P/Case-Shiller 20-City Composite Index
averaged a 1.1% gain in April, for a gain of almost 11% since last
April. Boston saw its biggest monthly gain in the index's 27-year
history, and San Francisco had its sixth straight price increase.
However, seven cities reported a decline since March, and S&P said
year-over-year price gains had begun to slow.
- U.S. incomes rose faster than personal
consumption in May; according to the Bureau of Economic Analysis,
incomes were up 0.4%, while spending rose 0.2%. Even after adjusting for
inflation, incomes were up 0.2% for the second straight month. The bad
news? That 0.2% increase in personal consumption expenditures--a key
inflation gauge for the Fed--resulted in the biggest 12-month gain since
October 2012; further increases could mean inflationary pressure that
might affect interest rates.
- The European Union formalized a trade
agreement with Ukraine, Georgia, and Moldova--the agreement whose
rejection by the former Ukrainian president led to subsequent protests
and ultimately Russia's annexation of Crimea. Shortly thereafter,
European leaders told Russia it had until Monday evening to persuade
rebels in Ukraine to respect a cease-fire or face further EU economic
sanctions.
- Durable goods orders fell 1% in May
after three strong months. However, the Commerce Department said most of
the decline was caused by a 31% drop in defense spending on equipment.
Other than defense, new orders were up 0.6%.
Eye on the Week Ahead
In a holiday-shortened week, trading volumes are likely to continue
to be light. Manufacturing data may suggest whether recent improvements
can be sustained. The European Central Bank is scheduled to report on
Thursday, but last month's decision to adopt a negative interest rate
likely precludes much immediate change in policy. And as always, the
jobs report, issued a day early, will be watched.
Data sources: Economic: Based on
data from U.S. Bureau of Labor Statistics (unemployment, inflation);
U.S. Department of Commerce (GDP, corporate profits, retail sales,
housing); S&P/Case-Shiller 20-City Composite Index (home prices);
Institute for Supply Management (manufacturing/services). Performance:
Based on data reported in WSJ Market Data Center (indexes); U.S.
Treasury (Treasury yields); U.S. Energy Information
Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing,
OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency
exchange rates). 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. All investing involves risk, including the potential
loss of principal, and there can be no guarantee that any investing
strategy will be successful.
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 2,000 U.S. small-cap common stocks. The Global Dow is an equally
weighted index of 150 widely traded blue-chip common stocks worldwide.
Market indices listed are unmanaged and are not available for direct
investment.
|
|
|
|
|
