The Markets
A horrific week around the globe did little to discourage
investors--that is, the few who were actually trading. The Nasdaq
reached a level it hadn't seen since March 2000, the S&P 500 had its
28th record close of the year, and the Dow industrials' gains took the
index above 17,000 once again. The Russell 2000, which has struggled
much of the summer, came within a hair of returning to positive
territory year-to-date. Meanwhile, the benchmark 10-year Treasury yield
rose as demand fell.
Last Week's Headlines
- Minutes of the most recent meeting of
the Fed's monetary policy committee showed intensified debate over
whether to accelerate an increase in interest rates once the Fed's
bond-buying program ends. However, Fed Chair Janet Yellen's speech at
the annual Jackson Hole gathering shed little light on how that debate
might be resolved, focusing instead on the slack that still remains in
the labor market.
- Increases in the cost of food and
shelter in July were partly offset by lower airline fares and the first
decline in the cost of energy since March. That left the Consumer Price
Index up 0.1% for the month--the smallest monthly increase since
February, according to the Bureau of Labor Statistics.
- Housing starts leaped 15.7% in July;
that meant they were up 21.7% from last July, according to the Commerce
Department. Building permits--an indicator of future activity--also were
up 8.1% for the month.
- There also was some good news about sales of existing homes. The National Association of Realtors®
said July's 2.4% gain was the fourth straight monthly increase, though
sales were still 4.3% lower than a year earlier. Foreclosures and short
sales represented 9% of all sales--far below the 15% of July 2013, and
the first time since October 2008 that the percentage has been in the
single digits.
- The Philly Fed's August manufacturing
survey showed a strong increase, rising to 28 from 23.9 in July. It was
the third straight month of gains and the highest reading since March
2011. However, growth in new orders and shipments fell slightly.
- The Conference Board's index of
leading economic indicators saw sharp improvement in July. The 0.9%
increase was helped by gains in building permits, financial markets, and
employment.
- Bank of America will pay $16.65
billion to settle accusations by the Justice Department, Securities and
Exchange Commission, several states, and other governmental agencies
that it deliberately misrepresented mortgage-backed securities that were
backed by home loans that subsequently went bad. The settlement is
reportedly the largest to result from government investigations into
bank practices that led up to the 2008 financial crisis. Under the
agreement, $7 billion of the money will be used to help modify borrowers
who are underwater on home loans and deal with abandoned properties.
Eye on the Week Ahead
As the release of Q2 earnings reports winds to a close, the GDP
number for Q2 will be watched to see if the robust 4% initial estimate
is revised downward. Home prices and durable goods orders will have to
contend with end-of-summer activities for traders' attention.
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.