The Markets
What a week! Investors had to take cover as several market indexes swooned to depths not seen in quite some time. Stocks responded negatively to China's continued economic woes, the not-entirely-unexpected resignation of Greece's prime minister (although he may be reelected in September), and crude oil hovering around $40. Compared to the August 14 close, the Dow lost nearly 1,000 points--closing down about 6%, Nasdaq dropped close to 7%, and each of the major market indexes listed here are now in negative territory year-to-date.
The price of gold (COMEX) continued trending upward, selling at about $1,159.90 by late Friday afternoon. Crude oil (WTI) prices dropped further, selling at $40.29/barrel by week's end. The national average retail regular gasoline price increased to $2.716 per gallon on August 17, 2015, $0.087 above the previous week's price and $0.756 below a year ago.
Last Week's Headlines
- The minutes of the July meeting of the Federal Open Market Committee (FOMC) confirmed what had been alluded to by some individual members, including Chairwoman Janet Yellen--the economy in general is moderately gaining and the appropriate time is fast approaching for an interest rate increase. However, there is not a clear consensus among the members as to when rates should be raised.
- Inflation increased in July, but only by the slightest of margins. The Consumer Price Index for all urban consumers increased 0.1% in July from a month earlier, the U.S. Bureau of Labor Statistics reported this past week. Over the last 12 months, the all items index rose 0.2% before seasonal adjustment. However, excluding the volatile food and energy components, the index has gained 1.8% for the 12 months ended July 2015.
- In the week ended August 15, new claims for unemployment insurance rose to 277,000, an increase of 4,000 from the previous week's revised level, which was revised down by 1,000 from 274,000 to 273,000. The number of continuing unemployment insurance claimants was 2,254,000 for the week ended August 8--rendering an advance seasonally adjusted insured unemployment rate of 1.7% for that week. While new claims rose last week, these readings remain at historic lows.
- U.S. manufacturers indicated production growth slowed during August, with output, new business, and payroll numbers all increasing at a slower rate than in the previous month according to Markit's Purchasing Managers' Manufacturing Index (PMI). As a result, the headline seasonally adjusted PMI dipped from 53.8 in July to 52.9 in August. The index remained above the neutral 50.0 threshold, but the latest reading was the lowest since October 2013.
- Overall, the housing market continued its positive trend. Home builder confidence hit its highest level since November 2005, according to the National Association of Home Builders. Statistically, housing starts were a bit of a mixed bag, however. According to the Census Bureau, privately owned housing units authorized by building permits in July were down 16.3% compared to June, while single-family permits fell 1.9%. Conversely, privately owned housing starts rose 0.2% from June, the highest since October 2007. Single-family housing starts increased 12.8%, while privately owned housing completions in July were 2.4% above the revised June estimate.
- Reaching the highest rate since February 2007, total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums, and co-ops, increased 2.0% to a seasonally adjusted annual rate of 5.59 million in July from a downwardly revised 5.48 million in June, according to the National Association of Realtors®.
Eye on the Week Ahead
Two important indicators relied on by the Federal Reserve in deciding whether to raise interest rates will be reported on next week. Both the GDP and personal income and outlays are indicators of inflationary trends, and also provide a general gauge on the strength of the economy.
Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: 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.
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