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Market Week: August 17, 2015

Key Dates/Data Releases

8/17: Housing market index, Treasury international capital

8/18: Housing starts

8/19: Consumer Price Index, FOMC minutes

8/20: Jobless claims, existing home sales

8/21: PMI Manufacturing Index

The Markets (as of market close August 14, 2015)

Stocks moved slightly ahead of last week. Both the large-cap S&P 500 and Dow posted modest gains by week’s end as did the small-cap Russell 2000. The Nasdaq was relatively flat posting only a 0.09% gain week-on-week. The Global Dow, possibly influenced by the generally slumping Chinese economy coupled with that government’s devaluation of the yuan, finished the week in negative territory.

The price of gold (COMEX) rebounded from last week, selling at about $1,113.20 by late Friday afternoon. Prices for crude oil (WTI) fell to a level not seen since early 2009, selling at $42.18/barrel by week’s end. The national average retail regular gasoline price decreased to $2.629 per gallon on August 10, 2015, $0.060 less than last week’s price and $0.876 below a year ago.

Market/Index 2014 Close Prior Week As of 8/14 Weekly Change YTD Change
DJIA 17823.07 17373.38 17477.40 0.60% -1.94%
Nasdaq 4736.05 5043.54 5048.24 0.09% 6.59%
S&P 500 2058.90 2077.57 2091.54 0.67% 1.59%
Russell 2000 1204.70 1206.90 1212.69 0.48% 0.66%
Global Dow 2501.66 2517.77 2501.99 -0.63% 0.01%
Fed. Funds 0.25% 0.25% 0.25% 0% 0%
10-year Treasuries 2.17% 2.16% 2.20% 4 bps 3 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

  • The Producer Price Index, which measures the prices companies receive for goods and services, advanced a seasonally adjusted 0.2% in July, the U.S. Bureau of Labor Statistics reported this past week. Final demand prices rose 0.4% in June and 0.5% in May. Even with the recent uptick in prices, the PPI has generally declined over the past year with overall producer prices down 0.8% compared to the twelve-month period ending July 2014.
  • Nonfarm business sector labor productivity increased at a seasonally adjusted 1.3% annual rate during the second quarter of 2015, the U.S. Bureau of Labor Statistics reported, as output increased 2.8% and hours worked increased 1.5%. From the second quarter of 2014 to the second quarter of 2015, productivity increased 0.3%, reflecting increases in output (2.8%) and hours worked (2.6%) during that period.
  • Compared to May, the number of job openings fell slightly in June, according to the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS). The decrease in the number of job openings may be due, in part, to an increase in the number of new hires, which rose 0.1% to 3.7%. The report further explains that large numbers of hires and separations occur every month throughout the business cycle. Net employment change results from the relationship between hires and separations. When the number of hires exceeds the number of separations, employment rises. Conversely, when the number of hires is less than the number of separations, employment declines. Over the 12 months ending in June 2015, hires totaled 60.6 million and separations totaled 57.9 million, yielding a net employment gain of 2.7 million.
  • In the week ending August 8, the advance figure for seasonally adjusted initial claims for unemployment insurance was 274,000, an increase of 5,000 from the previous week’s revised level. The previous week’s level was revised down by 1,000 from 270,000 to 269,000. The 4-week moving average was 266,250, a decrease of 1,750 from the previous week’s revised average. This is the lowest level for this average since April 15, 2000 when it was 266,250. The advance seasonally adjusted insured unemployment rate was 1.7% for the week ending August 1, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured (continuing) unemployment during the week ending August 1 was 2,273,000, an increase of 15,000 from the previous week’s revised level.
  • Ten months into the Treasury’s fiscal year, the total budget deficit through July 2015 was $465.5 billion or about $5.0 billion over the same ten-month period last year, according to the monthly Treasury statement. July’s outlays were much higher than those for June, reflecting a shifting of payments from August to July. Excluding these items, the adjusted deficit is actually about $111.0 billion, which would bring the ten-month deficit to $428.0 billion vs. $460.5 billion for the same period in 2014.
  • The U.S. Census Bureau announced that advance estimates of U.S. retail and food services sales for July were $446.5 billion, an increase of 0.6% from the previous month, and up 2.4% over July 2014. Total sales for the May 2015 through July 2015 period were up 2.3% from the same period a year ago. The May 2015 to June 2015 percent change was revised up from -0.3% to virtually unchanged. The sales report for July, plus the revised upward numbers for May and June point to a likely upward revision of the second quarter GDP. These favorable sales numbers also strengthen the expectation that the Fed will raise interest rates in September.
  • U.S. import prices declined 0.9% in July, after recording no change the previous month, the U.S. Bureau of Labor Statistics reported. Both fuel prices and nonfuel prices contributed to the July decrease. The price index for U.S. exports fell 0.2% in July following a 0.3% drop in June.
  • The Census Bureau reported that manufacturers’ inventories were up 0.8% in June, while sales rose 0.2% for the same period. The inventory-to-sales ratio rose slightly from 1.36 to 1.37.
  • Industrial production increased 0.6% in July after moving up 0.1% in June. In July, manufacturing output advanced 0.8% primarily spurred by an increase in motor vehicle production, which jumped 10.6%. Production elsewhere in manufacturing excluding vehicles edged up only 0.1%.
  • According to the University of Michigan’s Consumer Survey, consumer confidence was virtually unchanged in early August at 92.9 compared to 93.1 for July. Nevertheless, this marks the highest nine month average since 2004. Renewed strength in personal finances largely offset slight declines in prospects for the national economy and buying conditions, which is attributable, in part, to the expected increase in interest rates.
  • Internationally, while some details remain to be ironed out, Greece and its creditors reached agreement on the terms of a new bailout program, which, if ratified by other eurozone countries, could provide financing to Greece of upwards of 86 billion euros over the next three years. In response to a sluggish export sector and overall economic weakness, China devalued its currency (yuan) compared to the dollar.

Eye on the Week Ahead

The housing market has been upbeat for most of the year. Next week, reports focusing on new construction and existing home sales will show whether this favorable trend continues. Also, the minutes of last month’s FOMC meeting should shed more light on whether there’s a consensus among members as to when interest rates will be raised.

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/ Market Data (oil spot price, WTI Cushing, OK); (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.