The Markets
The beginning of the
week saw equities still reeling from the Brexit vote. However, the
markets closed with a flourish, recouping all of the losses from the
prior week. Each of the indexes listed here enjoyed positive returns by
week's end with each index gaining over 3.0% week-over-week, except the
Russell 2000, which finished the week up about 2.6%. Year-to-date, only
the Nasdaq and Global Dow remain below their 2015 closing values, but
they're gaining ground. While equities gained some traction, long-term
bond yields touched lows that hadn't been seen in quite some time.
Crude oil (WTI) closed
at $49.28 a barrel last week, up $1.71 from the previous week. The price
of gold (COMEX) rose to $1,344.90 by late Friday afternoon, up from the
prior week's price of $1,319.10. The national average retail regular
gasoline price decreased to $2.329 per gallon on June 27, $0.024 under
the prior week's price and $0.472 below a year ago.
Last Week's Headlines
- The third estimate of the first
quarter 2016 gross domestic product--the value of the goods and services
produced by the nation's economy less the value of the goods and
services used up in production, adjusted for price changes--increased at
an annual rate of 1.1%. The second estimate for the first quarter GDP
showed an increase of only 0.8%. The third estimate is based on more
complete data. The primary difference between the second and third
estimates for the first quarter GDP is that exports increased more than
previously estimated. In the fourth quarter of 2015, the GDP increased
1.4%. Compared to the fourth quarter, total business investment declined
as did consumer spending in the first quarter 2016. The economy
traditionally starts off slower during the first three months of the
year, often picking up speed over the spring and summer months, leading
to guarded optimism for the second quarter GDP.
- Personal income increased $37.1
billion, or 0.2%, and disposable personal income (net after taxes)
increased $33.9 billion, or 0.2% in May, according to the Bureau of
Economic Analysis. Personal consumption expenditures, the Federal
Reserve's preferred inflation measure, increased $53.5 billion, or 0.4%.
Compared to April, both income and spending (PCE) slowed in May. In
April, personal income increased $75.4 billion, or 0.5%, DPI increased
$68.6 billion, or 0.5%, and PCE increased $141.2 billion, or 1.1%, based
on revised estimates.
- The trade gap between imports and
exports grew in May, according to the latest report from the Census
Bureau. Exports for May were at $119.0 billion, while imports came in at
$179.6 billion, resulting in a trade deficit of roughly $60.6 billion.
Exports fell 0.2% from April, and imports increased a sharp 1.6%. The
trade gap in April was $57.5 billion.
- Home prices continue to rise according
to the latest report from the S&P/Case-Shiller Home Price Index,
which reported a 5.0% annual gain in April, down from 5.1% the previous
month. Before seasonal adjustment, the National Index posted a
month-over-month gain of 1.0% in April.
- Following three straight months of
gains, pending home sales took a step back in May, according to the
National Association of Realtors®. The Pending Home Sales Index dropped
3.7% to 110.8 in May from a downwardly revised 115.0 in April. Low
mortgage rates and scant inventory are pushing home prices higher,
affecting the number of home sales.
- US manufacturers expressed guarded
optimism in May and June as manufacturing expanded. The Institute for
Supply Management® (ISM®) Purchasing Managers' Index® registered 51.3
for May, an increase of 0.5 percentage point from April's reading of
50.8. According to the report, new orders and production were seen as
growing, while employment and inventories were contracting. The
seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers'
Index™ (PMI™) registered 51.3 in June, up from 50.7 in May, and the
highest reading for three months. Higher levels of production, new
orders, and employment all helped to boost the index.
- The Conference Board Consumer
Confidence Index® increased to 98.0 in June, up from 92.4 in May. The
Present Situation Index increased from 113.2 to 118.3, while the
Expectations Index rose from 78.5 to 84.5 in June. According to the
Conference Board's Lynn Franco, "Consumers were less negative about
current business and labor market conditions, but only moderately more
positive, suggesting no deterioration in economic conditions, but no
strengthening either."
- In the week ended June 25, the advance
figure for seasonally adjusted initial unemployment insurance claims
was 268,000, an increase of 10,000 from the previous week's unrevised
level. The advance seasonally adjusted insured unemployment rate dropped
to 1.5%. The advance number for seasonally adjusted insured
unemployment during the week ended June 18 was 2,120,000, a decrease of
20,000 from the previous week's revised level.
Eye on the Week Ahead
Equities markets, at least domestically, seem to have halted the
downfall from the UK's referendum vote to withdraw from the European
Union. How this major world event affects other economic indicators
remains to be seen. This week, important reports on international trade
and the employment situation are released.
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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