Stocks were little changed last week as investors followed two major headlines. First was the FOMC meeting where the Federal Reserve held rates unchanged, as many had expected, leaving the funds target range set at 1.00 to 1.25 percent. As part of the Fed announcement, investors were hoping for “hints” on when the Fed would start unwinding its $4.5 trillion balance sheet. However, the most they got was “relatively soon,” which some are interpreting to mean either September or December. The reason why this matters to bond investors is that the removal of dollars form the bond market would mean a cut in demand for bonds which could begin to move interest rates higher. Second, was the Senate vote to repeal and replace Obamacare which so far has failed to pass. Healthcare stocks declined slightly into the vote and continued lower the remainder of the week, as investors cast their doubts on congress’ ability to fix the current problems in healthcare.
As we begin the month of August, we don’t expect much from Wall Street. Like most Americans Wall Street’s employees are still trying to get their last few days of vacation in before school starts, which typically results in lower trading volume this time of year. Of course, there are still several large companies yet to release their earnings in the coming week, and we certainly don’t want to count out their ability to give the market a boost.
Laif Meidell, CMT
We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster
Weekly Economic Update
HOUSEHOLDS ARE FEELING OPTIMISTIC
Unemployment is at a 16-year low, and the Conference Board’s consumer confidence index is near a 16-year high. It reached 121.1 in July, rising 3.8 points; analysts polled by MarketWatch expected a reading of 116.9. The University of Michigan’s consumer sentiment index rose to 93.4.1,2
HAVE HOME SALES REACHED A PLATEAU?
Last week, the National Association of Realtors announced a 1.8% June retreat for existing home sales. New home buying only advanced 0.8% for June by Census Bureau calculations. Analysts point to tight supply limiting resales and a scarcity of affordably priced new developments discouraging new home shoppers.3
GROWTH PICKED UP IN THE SECOND QUARTER
According to the Bureau of Economic Analysis, the economy expanded at an annual rate of 2.6% in Q2, with the yearly personal spending rate at 2.8%. As it presented its Q2 estimate, the BEA also revised Q1 consumer spending up from 1.1% to 1.9%.2
THE DOW LEADS THE WAY ON WALL STREET
Ascending 1.16% in five days, the Dow Industrials closed at 21,830.24 Friday. In contrast, both the S&P 500 and Nasdaq Composite staged minor weekly retreats. The S&P declined 0.02% to 2,472.08; the Nasdaq, 0.20% to 6,374.68.4
On Monday, NAR releases its June pending home sales index, and CNA Financial, Loews Corp., Pandora Media, and Papa John’s announce earnings. Tuesday offers earnings from Allstate, Apple, Archer Daniels Midland, Beazer Homes, Big 5 Sporting Goods, Cummins, Denny’s, Extended Stay America, HanesBrands, Herbalife, Pfizer, Phillips 66, Pitney Bowes, Sprint, Under Armour, Unisys, and Xerox, plus June consumer spending figures and ISM’s July factory PMI. A new ADP payrolls report appears Wednesday, along with earnings news from AmeriGas, AutoNation, Choice Hotels, Container Store, Cumulus Media, Energizer Holdings, Exelon, Fitbit, Garmin, Groupon, Humana, Icahn Enterprises, Marathon Oil, Square, Symantec, Take Two Interactive, Tesla, Time Warner, Transocean, and Vulcan Materials. On Thursday, investors review earnings from AMC Networks, Activision Blizzard, Aetna, Allergan, Avon, Berkshire Hathaway, Callaway Golf, Chesapeake Energy, Duke Energy, Fluor, GoPro, Hyatt, iHeartMedia, Kellogg, Kraft Heinz, Motorola, Noble Energy, Parker-Hannifin, RE/MAX Holdings, Shake Shack, TiVo, Viacom, Western Union, Wingstop, Wyndham Worldwide, Yelp, and Yum! Brands, plus new initial claims numbers and ISM’s July services PMI. The Department of Labor’s latest jobs report arrives Friday, along with earnings from Cigna, ITT, Revlon, and Sempra Energy.