The Markets
Equities continue to put
the upheaval caused by Brexit in the rearview mirror as several of the
indexes listed here are above their 2015 closing values. Of those
indexes, only the Nasdaq and Global Dow remain below their end-of-year
values. The S&P 500 exceeded its record high of 2130.82 during
trading last Friday, finally closing at 2129.90. June's favorable
employment report likely helped fuel the end-of-week surge. The 10-year
Treasury yield settled at a record low of 1.36%. After a turbulent start
to 2016, the stock indexes listed here have gathered momentum heading
to the middle of the summer.
Crude oil (WTI) closed
at $45.21 a barrel last week, down from $49.28 per barrel the previous
week. The price of gold (COMEX) rose to $1,367.40 by late Friday
afternoon, up from the prior week's price of $1,344.90. The national
average retail regular gasoline price decreased to $2.291 per gallon on
July 4, $0.038 under the prior week's price and $0.502 below a year ago.
Last Week's Headlines
- Better news from the employment sector
in June as the Bureau of Labor Statistics reported that 287,000 new
jobs were added, compared to only 49,000 (revised) in May. Job growth
occurred in leisure and hospitality, health care and social assistance,
and financial activities. Unemployment increased by 0.2 percentage point
to 4.9%, and the number of unemployed persons increased by 347,000 to
7.8 million. These increases largely offset declines in May and brought
both measures back in line with levels that had prevailed from August
2015 to April. The employment participation rate increased slightly from
62.7 in May to 63.1 in June. In June, the average workweek for all
employees on private nonfarm payrolls was 34.4 hours for the fifth
consecutive month, and the average hourly earnings for all employees on
private nonfarm payrolls edged up $0.02 to $25.61. Over the year,
average hourly earnings have risen by 2.6%.
- Factory orders fell $4.6 billion, or
1.0%, in May to $455.4 billion. This follows a 1.8% increase in April.
Durable goods orders dropped $5.4 billion, or 2.3%, to $230.4 billion. A
telling aspect of this report is the overall weakness in business
investment, reflective of a lack of expectations for growth in
manufacturing and consumer sales.
- Imports once again outpaced exports in
May, as the trade gap rose 10.1% from April. According to the Census
Bureau, the goods and services deficit was $41.1 billion, up $3.8
billion from April. May's exports were $182.4 billion, while imports
were $223.5 billion--$3.4 billion more than April imports. However,
year-to-date, the goods and services deficit decreased $7.2 billion, or
3.5%, from the same period in 2015. Exports decreased $47.2 billion or
4.9%. Imports decreased $54.3 billion or 4.7%. As has been the case for a
while now, the strength of the dollar abroad continues to weaken demand
for U.S. goods and services.
- According to the latest
Non-Manufacturing ISM® Report On Business®, economic activity in the
non-manufacturing sector grew in June. The Non-Manufacturing Index
registered 56.5% in June, 3.6 percentage points higher than the May
reading of 52.9%. The Non-Manufacturing Business Activity Index
increased 4.4 percentage points, the New Orders Index® increased by 5.7
percentage points, and the Employment Index grew 3 percentage points.
Those non-manufacturing industries reporting growth in June include
mining; arts; entertainment and recreation; retail trade; health care
and social assistance; utilities; and real estate.
- The minutes from FOMC's June meeting
were released last week. It is clear that the overwhelming deterrent to
raising interest rates was the May employment report, which showed only
38,000 (prior to its revision to 49,000) new jobs added.
- In the week ended July 2, the advance
figure for seasonally adjusted initial unemployment insurance claims was
254,000, a decrease of 16,000 from the previous week's unrevised level.
The advance seasonally adjusted insured unemployment rate bumped up to
1.6%. The advance number for seasonally adjusted insured unemployment
during the week ended June 25 was 2,124,000, a decrease of 44,000 from
the previous week's revised level.
Eye on the Week Ahead
Inflation is front and center next week as the latest reports on retail
sales and producer and consumer prices are available. Growth in producer
prices and consumer spending has been subdued as inflation remains
below the Fed's target rate of 2.0%. With retail sales accounting for
almost one-half of total consumer spending, next week's report should
help define where the economy is heading.
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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