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MARKET WEEK: AUGUST 10, 2015

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Key Dates/Data Releases

8/11: Productivity and costs

8/12: JOLTS, Treasury budget

8/13: Jobless claims, retail sales, import and export prices, business inventories

8/14: Producer Price Index, industrial production, consumer sentiment

The Markets (as of market close August 7, 2015)

It could be the result of an impending interest rate hike in September, or slumping oil prices, or lackluster earnings reports from some major companies, or it could be just summer doldrums, but the stock market definitely languished this past week as it has for most of the summer. The Dow continued its losing streak, falling over 300 points by week’s end. The S&P 500 and Nasdaq followed the trend as well. But the week’s biggest loser was the small-cap Russell 2000, which dropped 31 points, or over 2.5%.

Possibly in response to the increasing likelihood that interest rates are going up in the near term, the price of gold (COMEX) fell a bit compared to last week, selling at about $1,093.00 by late Friday afternoon. Prices for crude oil (WTI) continued spiraling downward, selling at $43.75/barrel by week’s end. The national average retail regular gasoline price decreased to $2.689 per gallon on August 3, 2015, $0.056 less than last week’s price and $0.826 below a year ago.

Market/Index 2014 Close Prior Week As of 8/7 Weekly Change YTD Change
DJIA 17823.07 17689.86 17373.38 -1.79% -2.52%
Nasdaq 4736.05 5128.28 5043.54 -1.65% 6.49%
S&P 500 2058.90 2103.84 2077.57 -1.25% 0.91%
Russell 2000 1204.70 1238.68 1206.90 -2.57% 0.18%
Global Dow 2501.66 2543.35 2517.77 -1.01% 0.64%
Fed. Funds 0.25% 0.25% 0.25% 0% 0%
10-year Treasuries 2.17% 2.18% 2.16% -2 bps -1 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

  • This past week, two members of the Federal Reserve indicated that the time is nearing when short-term interest rates will be increased–possibly as early as September. Both James Bullard, President of the Federal Reserve Bank of St. Louis, and Dennis Lockhart, President of the Federal Reserve Bank of Atlanta, said the economy is ready for the first interest rate hike in more than nine years. While the ultimate decision is likely to be influenced by labor market and inflation data, even a slight regression in those sectors may not forestall a rate increase. According to Lockhart, “It will take a significant deterioration in the economic picture for me to be disinclined to move ahead.”Ā (Source: Wall Street Journal)
  • The Commerce Department’s Personal Income and Outlays report is a valuable indicator of consumer income, savings, and spending. Compared to the prior month, personal income increased $68.1 billion or 0.4% in June, while disposable personal income increased $60.6 billion, or 0.5%. A valued indicator of inflation, personal consumption expenditures (consumer prices) rose 0.2% to $25.9 billion in June from May. Compared to this time last year, prices are up only 0.3%. For the 38th consecutive month, inflation has been below the Fed’s target of 2.0%.
  • According to the Report on BusinessĀ® from the Institute for Supply Management, manufacturing activity slowed in July, with the Manufacturing Index registering 52.7%, a decrease of 0.8% below the June reading of 53.5%. Both the New Orders Index and the Production Index increased compared to June, but the Employment Index came in 2.8% below the June reading of 55.5%, reflecting overall growing employment levels for the year, but at a slower rate. Another significant change was in July’s Prices Index, which slipped 5.5% from the June reading of 49.5%, attributable, in part, to low raw materials prices.
  • The Department of Commerce announced that construction spending for June was at a seasonally adjusted annual rate of $1,064.6 billion, 0.1% above the revised May estimate of $1,063.5 billion. The June 2015 figure is 12.0% above the June 2014 estimate of $950.3 billion. Construction spending increased for multifamily units, highways and education, while spending on new single-family homes and private nonresidential construction (commercial structures) fell compared to May. Even with the June slowdown, construction spending is at a seasonally adjusted annual rate of $1.06 trillion, the best pace in seven years.
  • Following two consecutive months of decreases, new orders for manufactured goods increased $8.7 billion, or 1.8% to $478.5 billion in June, according to the U.S. Census Bureau. New orders in June for manufactured durable goods (metal fabrication, farm machinery, computers), manufactured nondurable goods (food, beverages, textiles, apparel), and transportation equipment all generated gains over May.
  • The relative strength of the dollar is boosting imports and hampering exports, further widening the trade gap by about 7.1% in June. According to the Bureau of Economic Analysis, the goods and services deficit was $43.8 billion in June, up $2.9 billion from May’s revised total. Compared to May, exports for June dropped by $136 million, while imports increased $2.8 billion.
  • The Institute for Supply Management Non-Manufacturing Index for July came in at 60.3%–4.3 percentage points higher than June’s reading of 56%. According to the index, 15 non-manufacturing industries (including arts, entertainment & recreation, educational services, finance & insurance, health care & social assistance, construction, and utilities) reported growth in July.
  • For the week ended July 31, new claims for unemployment insurance increased by 3,000 to 270,000 compared to the prior week, according to the Department of Labor’s Unemployment Insurance Weekly Claims report. Data on continuing claims lags a week. For the week ended July 25, the insured unemployment rate was 1.7%, representing about 2.3 million continuing claimants.
  • Total nonfarm payroll employment increased by 215,000 in July, and the unemployment rate was unchanged at 5.3%, the U.S. Bureau of Labor Statistics reported last week. Job gains occurred in retail trade, health care, professional and technical services, and financial activities. In July, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $24.99. Over the year, average hourly earnings have risen by 2.1%. These numbers, while not overwhelming, may be solid enough to keep an interest rate increase by the Fed on the table for September.

Eye on the Week Ahead

Inflationary indicators will be front and center next week with reports on productivity and labor costs, industrial production, retail sales, and the Producer Price Index. We’ll also get a refreshed look at the University of Michigan’s Consumer Sentiment survey.

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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