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Archived Newsletters

Weekly Economic Update - 7.24.17

WILL STOCKS GET AN EARNINGS BOOST?

While the first full week of the Q2 earnings season saw no pronounced rallies, there were also no shocks. By Friday’s closing bell, 20% of S&P 500 member firms had reported calendar Q2 results, and a FactSet analysis showed 77% had topped sales projections and 73% had beaten earnings-per-share forecasts – a good sign in an earnings-driven market climate. The Nasdaq Composite gained 1.19% last week and settled at 6,387.75 Friday; the S&P 500 rose to 2,472.54 after a 5-day gain of 0.54%. As blue chips fell 0.27% across five trading days, the Dow Jones Industrial Average closed at 21,580.07 Friday. All three indices hit record highs during the week.1,2

 

CONSTRUCTION ACTIVITY SURGED IN JUNE

According to a new Census Bureau report, housing starts rose 8.3% last month, while building permits were up 7.4%. That counteracts the 2.8% fall for starts and the 4.9% drop for permits in May.3

  

GOLD TOPS $1,250

Settling at $1,254.90 Friday, the yellow metal hit its highest COMEX close since June 23, up 2.2% in five days. Silver rose 3.3% last week to a Friday close of $16.46.4

  

THIS WEEK: On Monday, Alphabet, Anadarko Petroleum, Celanese, Halliburton, Hasbro, and Stanley Black & Decker present earnings, and Wall Street also considers June existing home sales numbers. Tuesday offers a new Conference Board consumer confidence index and earnings from 3M, AT&T, Ameriprise Financial, Amgen, Biogen, Caterpillar, Chipotle, Chubb, Domino’s, Eli Lilly, Express Scripts, Freeport-McMoRan, General Motors, JetBlue, McDonald’s, Mondelez, PulteGroup, Quest Diagnostics, Smart & Final, Supervalu, Texas Instruments, U.S. Steel, and Universal Health. The Federal Reserve makes a policy statement Wednesday; investors will also look at June new home sales data and earnings from Anthem, Boeing, Coca-Cola, Corning, D.R. Horton, Discover, Facebook, Ford Motor Co., General Dynamics, Gilead Sciences, Hilton Worldwide, Ingersoll-Rand, O’Reilly, PayPal, Public Storage, Rent-A-Center, Rockwell Automation, Ryder System, State Street, Waste Management, West Marine, Whirlpool, and Whole Foods. Data on initial claims and June hard goods orders appears Thursday, plus earnings from Aflac, Ally Financial, Altria Group, Amazon, Baidu, Bristol-Myers Squibb, ConocoPhillips, Dow Chemical, Dr. Pepper Snapple, Dunkin’ Brands, Edison International, Expedia, Intel, Procter & Gamble, Raytheon, Revlon, Southwest Airlines, Spirit Airlines, Starbucks, Twitter, UPS, Valero Energy, Verizon, W.R. Grace, and Xerox. July’s final University of Michigan consumer sentiment index and the first Q2 GDP estimate appear Friday, plus earnings from American Airlines, Chevron, ExxonMobil, Magellan Health, and Merck.

 

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

+9.20

+16.54

+13.66

+5.58

NASDAQ

+18.66

+25.89

+23.67

+13.77

S&P 500

+10.44

+14.20

+16.29

+6.12

REAL YIELD

7/21 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

0.48%

0.05%

-0.67%

2.60%

 

 


Sources: wsj.com, bigcharts.com, treasury.gov - 7/21/172,5,6,7

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (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. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

 

Citations.

1 - cnbc.com/2017/07/21/us-stocks-ge-drops-earnings-season-oil.html [7/21/17]

2 - markets.wsj.com/us [7/21/17]

3 - investing.com/economic-calendar/ [7/21/17]

4 - marketwatch.com/story/gold-tries-for-most-robust-weekly-rise-in-two-months-as-dollar-drops-2017-07-21 [7/21/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F21%2F16&x=0&y=0 [7/21/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F21%2F16&x=0&y=0 [7/21/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F21%2F16&x=0&y=0 [7/21/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F20%2F12&x=0&y=0 [7/21/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F20%2F12&x=0&y=0 [7/21/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F20%2F12&x=0&y=0 [7/21/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F20%2F07&x=0&y=0 [7/21/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F20%2F07&x=0&y=0 [7/21/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F20%2F07&x=0&y=0 [7/21/17]

6 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [7/21/17]

7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [7/21/17]


Weekly Economic Update - 7.17.17

INFLATION PRESSURE WEAKENS

The Consumer Price Index was unchanged in June, according to the Bureau of Labor Statistics. That left its yearly advance at only 1.6%, nearly half a point below the Federal Reserve’s target (the core CPI was up 1.7%). After the announcement, some economists and market strategists wondered whether the Fed would rethink its plans for a third interest rate hike in 2017. The Producer Price Index rose 0.1% in June, leaving its yearly increase at 2.0%.1,2

   

RETAIL SALES, CONSUMER SENTIMENT INDEX DECLINE

For the second month in a row, households scaled back their retail purchases – retail sales were down 0.2% in June following a 0.1% May decline. Core sales fell 0.2% after a May retreat of 0.3%. The University of Michigan’s preliminary July consumer sentiment index lost 2.0 points off its final June mark to a reading of 93.1.1,2

 

OIL RALLIES

A projection of rising demand and news of a pipeline shutdown in Nigeria sent the price of light sweet crude 5.2% higher in a week. WTI crude settled at $46.54 on the NYMEX Friday, its best close since July 3.3

  

DOW ENTERS RECORD TERRITORY AGAIN

Friday, the Dow 30 notched its third straight record close: 21,637.74. At the same time, the S&P 500 also settled at a new record of 2,459.27. The Nasdaq Composite finished Friday’s market day at 6,312.47, a half-percent away from its all-time peak. For the week, the Dow rose 1.04%; the S&P, 1.41%; the Nasdaq, 2.59%.4,5

   

THIS WEEK: Monday’s earnings parade includes announcements from BlackRock, Charles Schwab, J.B. Hunt, and Netflix. On Tuesday, Wall Street examines earnings from Bank of America, CSX, Comerica, Goldman Sachs, Harley-Davidson, IBM, Johnson & Johnson, Lockheed Martin, TD Ameritrade, and UnitedHealth Group. Wednesday sees data on June housing starts and building permits, plus earnings from American Express, Fidelity National Financial, Morgan Stanley, Northern Trust, Qualcomm, T-Mobile, U.S. Bancorp, United Rentals, and W.W. Grainger. A new weekly initial claims report arrives Thursday, plus earnings news from Abbott Labs, Alliance Data Systems, American Airlines Group, BB&T, BoNY Mellon, Capital One, Cintas, eBay, E*TRADE, GATX, KeyCorp, Microsoft, NCR, Nucor, Philip Morris, Sherwin-Williams, Skechers, Snap-On, Travelers Companies, Union Pacific, Visa, and Whirlpool. On Friday, Colgate-Palmolive, Fifth Third Bancorp, General Electric, Honeywell International, Regions Financial, Schlumberger, and SunTrust Banks present earnings.

 

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

+9.49

+16.92

+13.87

+5.56

NASDAQ

+17.26

+25.40

+23.41

+13.32

S&P 500

+9.85

+13.66

+16.25

+5.84

REAL YIELD

7/14 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

0.57%

0.08%

-0.59%

2.73%

 

 


Sources: wsj.com, bigcharts.com, treasury.gov - 7/14/175,6,7,8

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (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. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

 

Citations.

1 - cnbc.com/2017/07/14/lack-of-inflation-raises-new-doubts-about-fed-ability-to-hike-interest-rates-this-year.html [7/14/17]

2 - investing.com/economic-calendar/ [7/14/17]

3 - marketwatch.com/story/oil-gains-pause-but-optimism-remains-after-iea-report-2017-07-14 [7/14/17]

4 - money.cnn.com/2017/07/14/investing/dow-record-trump-rally-wall-street/index.html [7/14/17]

5 - markets.wsj.com/us [7/14/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F14%2F16&x=0&y=0 [7/14/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F14%2F16&x=0&y=0 [7/14/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F14%2F16&x=0&y=0 [7/14/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F13%2F12&x=0&y=0 [7/14/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F13%2F12&x=0&y=0 [7/14/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F13%2F12&x=0&y=0 [7/14/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F13%2F07&x=0&y=0 [7/14/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F13%2F07&x=0&y=0 [7/14/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F13%2F07&x=0&y=0 [7/14/17]

7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [7/14/17]

8 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [7/14/17]


Weekly Economic Update - 7.10.17

HIRING PICKS UP AGAIN

The Department of Labor announced some good news Friday: the creation of 222,000 net new jobs in June, the largest hiring gain in four months. Approximately 4.7 million people reentered the labor force and found work in June, a peak unmatched in 27 years of monthly data. Wages rose 0.2% for an annualized gain of 2.5%. The main unemployment rate ticked north to 4.4% as more Americans joined the job hunt; the U-6 rate, including the underemployed, increased 0.2% to 8.6%, its first rise since January.1

   

ISM FACTORY PMI HITS 3-YEAR PEAK

In June, the Institute for Supply Management’s globally watched manufacturing purchasing manager index improved 2.9 points to 57.8, its highest reading since August 2014. ISM’s non-manufacturing PMI rose to 57.4 after a half-point gain; its June reading signaled the 90th straight month of expansion for the country’s service sector.2,3

 

GOLD SETTLES AT ITS LOWEST PRICE SINCE MARCH

The yellow metal fell to a COMEX close of $1,209.70 Friday. It is now on a 5-week losing streak. The price of gold sank 2.6% last week, while the price of silver dropped 6.9%; silver ended the week down at $15.43.4

  

MAJOR INDICES MAKE SMALL WEEKLY GAINS

Across a stretch of choppy trading days, the S&P 500 added just 0.07% to close at 2,425.18 Friday. The Nasdaq Composite and Dow Jones Industrial Average posted respective, 5-day advances of 0.21% and 0.30%. The Nasdaq wrapped up Friday’s market day at 6,153.08; the Dow, at 21,414.34.5

   

THIS WEEK: Monday, Barracuda Networks and WD-40 present earnings. On Tuesday, earnings appear from PepsiCo and Yum! Brands. Wednesday, Federal Reserve chair Janet Yellen visits Capitol Hill to begin two days of testimony on monetary policy in Congress; in addition, the Fed releases a new Beige Book, and Fastenal reports Q2 results. Thursday, Wall Street considers a new initial jobless claims report, plus the June Producer Price Index. On Friday, a river of data arrives: a new earnings season begins with announcements from Citigroup, JPMorgan Chase, PNC Financial Services Group, and Wells Fargo, complementing the initial July University of Michigan consumer sentiment index, the June Consumer Price Index, and June retail sales and industrial production reports.

 

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

+8.36

+19.66

+13.53

+5.73

NASDAQ

+14.30

+26.17

+21.90

+13.08

S&P 500

+8.32

+15.60

+15.80

+5.85

REAL YIELD

7/7 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

0.66%

-0.03%

-0.53%

2.79%

 

  


Sources: wsj.com, bigcharts.com, treasury.gov - 7/7/175,6,7,8

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (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. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

 

Citations.

1 - bloomberg.com/news/articles/2017-07-07/wage-weakness-amid-solid-hiring-adds-to-u-s-economic-puzzle [7/7/17]

2 - cnbc.com/2017/07/03/june-ism-manufacturing-index.html [7/3/17]

3 - instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm?SSO=1 [7/6/17]

4 - marketwatch.com/story/gold-slips-set-for-weekly-decline-ahead-of-jobs-report-2017-07-07 [7/7/17]

5 - markets.wsj.com/us [7/7/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F7%2F16&x=0&y=0 [7/7/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F7%2F16&x=0&y=0 [7/7/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F7%2F16&x=0&y=0 [7/7/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F6%2F12&x=0&y=0 [7/7/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F6%2F12&x=0&y=0 [7/7/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F6%2F12&x=0&y=0 [7/7/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F6%2F07&x=0&y=0 [7/7/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F6%2F07&x=0&y=0 [7/7/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F6%2F07&x=0&y=0 [7/7/17]

7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [7/7/17]

8 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [7/7/17]


Weekly Economic Update 7.3.17

HOUSEHOLD EARNINGS OUTPACE SPENDING

According to newly released Department of Commerce data, personal incomes improved 0.4% in May, but personal spending advanced just 0.1% after a 0.4% gain in April. Core consumer prices (minus food and energy costs) rose only 1.4% during the 12 months ending in May.1,2,3

   

WERE CONSUMERS MORE CONFIDENT IN JUNE?

By the looks of the University of Michigan’s monthly household sentiment index, no – that gauge fell 2.0 points to a mark of 95.1. On the other hand, the Conference Board’s consumer confidence index rose 1.3 points to a reading of 118.9.2,3

 

PENDING HOME SALES WEAKEN

A National Association of Realtors report showed housing contract activity declining by 0.8% in May. This follows a 1.7% dip for pending home sales in April.3

 

First-Quarter GDP REVISED HIGHER

Apparently, the opening three months of 2017 were not as economically sluggish as first thought. The Bureau of Economic Analysis released its third, concluding estimate of Q1 growth Thursday, modifying the number again to 1.4% from the previous revision to 1.2%.3

   

TECH SHARES SELL OFF AGAIN, STOCKS RETREAT

Volatility resurfaced in the tech and health care sectors last week, and as institutional investors reduced their holdings in firms within those industries, the effect rippled through all three major equity indices. For the week, the S&P 500 fell 0.61% to a Friday settlement of 2,423.41. The Nasdaq Composite slumped 1.99% to 6,140.42 by Friday, while the Dow Jones Industrial Average finished the week 0.21% lower at 21,349.63. Even so, Wall Street can look back on a fine first half for stocks. The S&P 500 just recorded its best 6-month gain since 2013.4,5

   

THIS WEEK: Wall Street takes a half-day on Monday, with stock trading wrapping up at 1:00pm EST; during the abbreviated session, investors will consider the June ISM factory PMI. Stock and bond markets are closed Tuesday for the July 4th holiday. Minutes from the June Federal Reserve policy meeting arrive Wednesday, plus May factory orders data. Thursday, the latest Challenger job-cut report and ADP payrolls report complement new initial claims figures and ISM’s June service sector PMI. On Friday, the Department of Labor issues its June employment report, and the Federal Reserve Board hands its semi-annual monetary policy report to Congress.

 

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

+8.03

+19.07

+13.15

+5.92

NASDAQ

+14.07

+26.80

+21.84

+13.59

S&P 500

+8.24

+15.46

+15.58

+6.12

REAL YIELD

6/30 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

0.58%

0.48%

-0.46%

2.65%

 

 


Sources: wsj.com, bigcharts.com, treasury.gov - 6/30/175,6,7,8

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (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. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

 

Citations.

1 - cnbc.com/2017/06/30/us-personal-income-may-2017.html [6/30/17]

2 - sca.isr.umich.edu [6/30/17]

3 - marketwatch.com/economy-politics/calendars/economic [6/30/17]

4 - marketwatch.com/story/stocks-end-mostly-higher-to-book-best-half-year-gains-in-years-2017-06-30 [6/30/17]

5 - markets.wsj.com/us [6/30/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F29%2F12&x=0&y=0 [6/30/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F29%2F12&x=0&y=0 [6/30/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F29%2F12&x=0&y=0 [6/30/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]

7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [6/30/17]

8 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [6/30/17]


Monthly Economic Update - July 2017

THE MONTH IN BRIEF
June brought some definite headwinds to Wall Street, but the broad stock market still advanced. The S&P 500 added 0.48% across the month, even with tech shares selling off. As anticipated, the Federal Reserve raised the federal funds rate by another quarter point. Last month was a trying one for European stocks as well as oil and many other commodities. The latest round of U.S. economic indicators contained some disappointments; though, manufacturing and home sales surprised to the upside. All in all, increased volatility, terrorist incidents, and political happenings did not have much of an effect on investor confidence.1

    

DOMESTIC ECONOMIC HEALTH
Hours before the June Federal Reserve policy meeting, traders put the odds of a rate hike at 99%. The central bank did not challenge that expectation. On June 14, it took the benchmark interest rate north to a range of 1.00-1.25%. As it did so, it made one unexpected move: it set a rough start date for unwinding its balance sheet. The Federal Open Market Committee’s latest policy statement said that process would begin “this year.” Initially, the Fed plans to let $6 billion in Treasury notes and $4 billion in mortgage bonds mature each month, with the amounts gradually rising to $30 billion per month in Treasuries and $20 billion per month in mortgage-backed securities.2

 

Judging by the latest reading on the Consumer Price Index, the Fed might have to address low inflation again. The annualized inflation rate fell 0.3% in May to 1.9%, beneath the Fed’s long-established 2% target. Through May, core consumer prices had only advanced 1.7% in a year. In contrast, producer prices were up 2.4% in 12 months, even with the headline Producer Price Index flat in May.3

 

The Department of Labor’s latest employment report also fell short of expectations. The May job gain was merely 138,000. While the headline jobless rate hit a 16-year low of 4.3%, that was partly due to a reduction in the labor force. The U-6 rate (which measures both unemployment and underemployment) fell to 8.4%, a 10-year low. Wages were up a decent 2.5% in 12 months.4

  

The Fed rate move and the latest inflation and jobs data did not upset Main Street. The Conference Board’s consumer confidence index, already remarkably high at 117.6 in May, climbed to 118.9 in June. (The University of Michigan’s household sentiment index came in at a final June mark of 95.1, down 2.0 points from the end of May, but up 1.6 points from June 2016.)3,5

     

Consumer wages were up 0.4% in May according to the Department of Commerce, yet consumer spending rose just 0.1%. May retail sales figures were troubling – overall retail purchases decreased by 0.3%, while core retail sales (minus gas and autos) were flat. Statistics like these did not exactly signal strong second-quarter growth for the economy. Looking back at the first quarter, the Bureau of Economic Analysis upgraded the Q1 GDP number to 1.4% from its previous 1.2% estimate.3

 

On the factory front, the Institute for Supply Management’s manufacturing purchasing manager index rose slightly to 54.9 in May; an index above 50 indicates sector expansion. The Institute’s non-manufacturing PMI, which tracks service sector growth, arrived at a mark of 56.9 in May. Federal government reports showed that industrial output was flat in May, while manufacturing output fell 0.4%. Looking to the near future, durable goods orders slipped 1.1% in May with core orders at just 0.1%.3,6

   

GLOBAL ECONOMIC HEALTH
In the Asia-Pacific region, China saw another increase in manufacturing output. Its official purchasing manufacturer index rose half a point to 51.7 in June; economists surveyed by Reuters had forecast a slight retreat to 51.0. The P.R.C.’s official service sector PMI also strengthened 0.4 points to a mark of 54.9. China’s government estimated its first-quarter growth at 6.9%, topping a recent Reuters poll estimate of 6.8%. The nation’s debt level continued climbing, however – according to a Nomura estimate, it reached 251% of GDP during the first quarter. India was set to institute a new national goods and services tax as part of Prime Minister Narendra Modi’s financial reforms; business owners feared a near-term economic slowdown preceding Modi’s envisioned boost in government revenues.7,8

    

Commenting on the eurozone economy in late June, European Central Bank President Mario Draghi said “the threat of deflation is gone and reflationary forces are at play,” noting that the region is enjoying “above-trend” expansion. Investors and economists alike took these words as a hint that the ECB would cut back its bond buying this year, perhaps as soon as September; some were worried that the ECB would commit a policy error and make hawkish moves too soon. For the record, euro area inflation ticked down to 1.3% in June per Eurostat’s flash estimate.9,10

         

WORLD MARKETS
June was a rocky month for European equities. All of the major European exchanges gave up ground. The hardest fall among them was taken by the IBEX 35. Spain’s main index lost 3.98% in June. France’s CAC 40 tumbled 3.49%. In London, the FTSE 100 lost 2.84%. The regional FTSE Eurofirst 300 retreated 2.76% as did Russia’s Micex; Germany’s DAX lost 2.17%.11

 

With its minor June gain, our own S&P 500 also outperformed some other foreign indices. June brought a 1.66% loss for Brazil’s Bovespa, a 1.24% decline for Canada’s TSX Composite, and an 0.76% retreat for India’s Sensex. Some key Asian indices did much better than our broad equity benchmark: Japan’s Nikkei 225 advanced 1.81%; Korea’s Kospi, 2.05%; Taiwan’s TSE 50, 3.35%; China’s Shanghai Composite, 2.60%. Other June gains: Hong Kong’s Hang Seng, 0.24%; Mexico’s Bolsa, 1.18%; Australia’s All Ordinaries, 0.14%; MSCI World, 0.25%; MSCI Emerging Markets, 0.54%.11,12

               

COMMODITIES MARKETS

Many commodity prices fell in June. Three key commodity futures advanced for the month – copper gained 4.46%; wheat, a remarkable 18.56%; soybeans, 2.97%. Beyond that, losses prevailed.13

  

Sugar took the largest June descent, dropping 15.27%. Cotton stumbled 8.60%; cocoa, 6.81%; unleaded gasoline, 5.99%. Light sweet crude fell 4.73%; WTI crude ended the month at $46.33 a barrel on the NYMEX. Silver sank 4.00% to a June 30 close of $16.57 an ounce. Smaller retreats were taken by coffee (3.06%), platinum (2.57%), gold (2.21%), heating oil (1.80%), the U.S. Dollar Index (1.38%), natural gas (1.27%), and corn (0.40%). When Wall Street’s trading day ended June 30, gold was worth $1,241.40 an ounce.13,14

       

REAL ESTATE
Home sales accelerated again in May. The National Association of Realtors announced a 1.1% gain for resales, partly reversing a 2.5% April retreat. The Census Bureau found new home buying up by 2.9% after a 7.9% dip in the fourth month of the year.3

  

May saw a notable falloff in groundbreaking and permits for new projects, however. Housing starts weakened 5.5%, according to the Census Bureau, with permits down 4.9%. NAR’s pending home sales index also declined in May – just 0.8% compared to its 1.7% slip in April. While these real estate indicators fell, house prices, more or less, held up. April’s 20-city composite S&P/Case-Shiller home price index (arriving last month) advanced 0.9%, meaning it was up 5.7% on a yearly basis.3

  

The Federal Reserve has gradually lifted the federal funds rate, but mortgage rates are more affected by 10-year Treasury yields – and as 2017 has proceeded, those yields have not dramatically risen. Between Freddie Mac’s June 1 and June 29 Primary Mortgage Market Surveys, popular home loans grew cheaper. Average interest rates on the 30-year FRM fell from 3.94% to 3.88%, and for the 15-year FRM, rates lessened from 3.19% to 3.17%. Only average rates on the 5/1-year ARM increased across June, rising to 3.17% from 3.11%.15

        

LOOKING BACK…LOOKING FORWARD
The Russell 2000 rallied nicely last month, advancing 3.25% to a June 30 close of 1,415.36. Blue chips also did well – the Dow Jones Industrial Average gained 1.62% in June, more than tripling the 0.48% rise for the S&P 500. The Dow ended June at 21,349.63; the S&P, at 2,423.41. As institutional investors thinned their holdings in the tech sector, the Nasdaq took a monthly loss of 0.93%, finishing June at 6,140.42. Renewed volatility sent the CBOE VIX 7.40% higher across June; it ended the month at 11.18.16,17,18     

      

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

+8.03

+19.07

+13.15

+5.92

NASDAQ

+14.07

+26.80

+21.84

+13.59

S&P 500

+8.24

+15.46

+15.58

+6.12

REAL YIELD

6/30 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

0.58%

0.48%

-0.46%

2.65%

 

 


Sources: barchart.com, bigcharts.com, treasury.gov – 6/30/1718,19,20,21

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

        

There was no “June swoon” on Wall Street; how will July unfold? Can the market keep grinding higher and dismiss perceptions that it is overvalued? A strong jobs report and encouraging fundamental indicators could reassure investors worried about economic sluggishness. Distinct recession signals seem wholly absent, and 2017 may simply see a repeat of the economic pattern characteristic of the past few years, in which slow first-quarter expansion gives way to improved Q2 and Q3 growth. During the past 30 years, the market has traditionally underperformed in summer compared to other times of the year – but when stocks have done well in the first half of a year, they have tended to upend those low expectations. With bulls still firmly in charge on the Street, July could bring investors some modest gains.22

     

UPCOMING ECONOMIC RELEASES: Across the rest of July, Wall Street will consider these major economic news items: the Department of Labor’s June employment report (7/7), a new Federal Reserve Beige Book (7/12), the June PPI (7/13), July’s preliminary University of Michigan consumer sentiment index, June retail sales and industrial production, and the June CPI (7/14), June housing starts and building permits (7/19), June existing home sales (7/24), July’s Conference Board consumer confidence index and the May S&P/Case-Shiller home price index (7/25), a new Federal Reserve policy statement and June new home sales (7/26), June durable goods orders (7/27), the federal government’s initial estimate of second-quarter economic growth and the University of Michigan’s final July consumer sentiment index (7/28), and then, June pending home sales (7/31). June consumer spending and consumer income data appears at the start of August.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (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 Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. . The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The FTSE Eurofirst 300 measures the performance of Europe's largest 300 companies by market capitalization and covers 70% of Europe's market cap. The MICEX 10 Index is an unweighted price index that tracks the ten most liquid Russian stocks listed on MICEX-RTS in Moscow. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The Bovespa Index is a gross total return index weighted by traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE).  The Nikkei average is the most watched index of Asian stocks. The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. The FTSE TWSE Taiwan 50 Index consists of the largest 50 companies by full market value, and is also the first narrow-based index published in Taiwan. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The All Ordinaries (XAO) is considered a total market barometer for the Australian stock market and contains the 500 largest ASX-listed companies by way of market capitalization. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The MSCI World Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

 

Citations.

1 - money.cnn.com/data/markets/sandp/ [6/30/17]

2 - forbes.com/sites/laurengensler/2017/06/14/fed-raises-rates-june/[6/14/17]

3 - investing.com/economic-calendar/ [6/30/17]

4 - nytimes.com/2017/06/02/business/economy/jobs-report.html [6/2/17]

5 - sca.isr.umich.edu [6/30/17]

6 - tinyurl.com/r8yw9qp [7/3/17]

7 - cnbc.com/2017/06/29/china-manufacturing-accelerates-in-june-with-official-pmi-at-51-point-7-beating-expectations-for-51-point-0.html [6/29/17]

8 - gulfnews.com/business/economy/uncertainty-as-india-s-landmark-new-sales-tax-rolled-out-1.2051987 [7/2/17]

9 - investors.com/news/draghi-drama-undercuts-key-stock-market-support/ [6/29/17]

10 - ec.europa.eu/eurostat [6/30/17]

11 - markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [6/30/17]

12 - msci.com/end-of-day-data-search [6/30/17]

13 - money.cnn.com/data/commodities/ [6/30/17]

14 - marketwatch.com/investing/index/dxy/historical [6/30/17]

15 - freddiemac.com/pmms/archive.html?year=2017 [7/3/17]

16 - google.com/finance?cid=626307 [6/30/17]

17 - money.cnn.com/quote/quote.html?symb=VIX [6/30/17]

18 - barchart.com/stocks/indices#/viewName=performance [6/30/17]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F29%2F12&x=0&y=0 [6/30/17]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F29%2F12&x=0&y=0 [6/30/17]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F29%2F12&x=0&y=0 [6/30/17]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]

20 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [6/30/17]

21 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [6/30/17]

22 - marketwatch.com/story/stock-market-poised-to-kick-off-july-4th-week-with-fireworks-of-its-own-2017-06-30 [6/30/17]

 


Quarterly Economic Update - Q2 2017

THE QUARTER IN BRIEF
After a remarkable first quarter, the stock market cooled off slightly in Q2 – but investors still saw substantial gains. Strong earnings helped take Wall Street’s collective mind off a decidedly mixed bag of economic signals. Consumers remained confident as the quarter unfolded; although hiring, inflation, and consumer spending weakened. Home sales declined, then rebounded. Overseas, factory activity in China and the eurozone showed improvement, and foreign equity benchmarks continued climbing. Many commodities took sizable Q2 losses. When the quarter ended, the bulls were still firmly in charge.1

   

DOMESTIC ECONOMIC HEALTH
As one quarter ends, the Bureau of Economic Analysis commonly makes its third and last assessment of the prior quarter’s economic growth (though, even this “final” estimate may be adjusted in later years). In the last week of June, the BEA announced a “final” Q1 growth number of 1.4%, which was nothing to celebrate. Would Q2 growth come in above 2%?2

 

Second-quarter consumer spending data from the Department of Commerce raised some concerns about reaching that percentage of growth. While April and May brought solid growth for personal incomes (0.3% in the former month and 0.4% in the latter), the gain in personal spending fell from 0.4%, in the fourth month of the year, to 0.1%, in the fifth. Retail sales, too, tailed off: after rising a robust 0.4% in April, they fell 0.3% for May.2

 

Households did feel good about the state of the economy and their financial prospects. At final readings of 97.0 in April, 97.1 in May, and 95.1 in June, the University of Michigan’s consumer sentiment index stayed well north of its 86.1 historical average. The Conference Board’s index ended the quarter at a very high mark of 118.9.2,3

 

Hiring figures from the Department of Labor were somewhat weak. Monthly employment reports showed that U.S. firms added 174,000 net new jobs in April and 138,000 net new jobs in May. (In March, the number had been just 50,000.) Was the job market simply at capacity? Only time would tell. Reductions in the labor force participation rate helped send both the headline jobless rate and the U-6 rate, factoring in the underemployed, to notable lows. By June, the headline (U-3) rate had dipped to 4.3%, a level unseen in 16 years; the U-6 rate had fallen to a 10-year low of 8.4%.4

 

On the manufacturing front, the news appeared better. The Institute for Supply Management’s factory purchasing manager index rose to 57.8 in June, a 34-month peak. This was after readings of 54.8 in April and 54.9 in May. ISM’s service sector PMI was also well above the expansion line of 50 in April and May, displaying respective readings of 57.5 and 56.9 in those months.5,6

 

Still, federal government reports showed manufacturing and industry production falling off in Q2. Industrial output jumped 1.1% in April; then, flattened in May. Manufacturing output went from a 1.1% gain to a 0.4% retreat. Hard goods orders were down 0.9% in April; then, down 1.1% a month later.2

 

Annualized inflation declined during the quarter. The May Consumer Price Index showed only a 12-month gain of 1.9% and just 1.7% for core prices. A month earlier, yearly inflation had been at 2.2% with the core CPI rising 1.9%. Did wholesale inflation also lessen? The headline number did, ticking down 0.1% in May to 2.4%. The core Producer Price Index was up 2.1% year-over-year through May, a 0.2% increase from April.2

 

The Federal Reserve lifted the federal funds rate by another quarter point in June to a target range of 1.00-1.25%. It also disclosed it would begin reducing its massive bond portfolio “this year,” which could put pressure on long-term interest rates. The central bank intends to let $6 billion of Treasuries and $4 billion per month in agency debt and mortgage-linked securities mature per month to start. In late June, all 34 of the country’s largest banks passed the Fed’s annual stress tests – a milestone unseen since their adoption seven years ago.7,8

        

GLOBAL ECONOMIC HEALTH
Emmanuel Macron’s decisive victory in France’s national election cheered investors concerned about the potential for another crack in the European Union, and it started a rally in the euro, which continued in June after European Central Bank President Mario Draghi commented that “the threat of deflation is gone and reflationary forces are at play.” Investors took those words as a strong hint that the ECB would presently end its quantitative easing. As the quarter concluded, Chancellor Angela Merkel’s reelection seemed probable in Germany; a fourth Merkel term would be another boost to EU economic confidence and stability.1,9

       

Manufacturing economies accelerated around the world in the quarter. The Markit eurozone factory PMI reached 57.0 in May, and then, 57.4 in June (a 4-year peak). Manufacturing PMIs in Vietnam, India, South Korea, Taiwan, and Japan were all above 50 (the level signifying sector expansion) as Q2 wrapped up. China’s official factory PMI was at 51.2 in May; then, 51.7 in June. Its official service sector PMI came in at 54.5 in May and 54.9 in June.10,11

    

WORLD MARKETS
One factoid conveys how well global equity benchmarks did in 2017’s first half: 26 of the world’s 30 major indices posted 6-month gains. The last time that happened was in 2009 – and it has only occurred in four other similar intervals within the past two decades.12

 

Germany’s DAX finished the first half up an impressive 7.4% YTD, and France’s CAC 40 was up 5.3% on the year when Q2 ended. The United Kingdom’s FTSE 100 was 2.4% higher YTD on June 30. India’s Sensex topped the 31,000 level in June, reaching an all-time peak and outdistancing nearly all of its nearby Asia-Pacific benchmarks with an astounding 16.1% first-half advance. The Nikkei Asia300 index did even better, ending the first half of 2017 up more than 21% YTD.13,14

 

Looking at some regional indexes, the pan-Europe Stoxx 600 index fell 0.5% in Q2, but still had risen 5.0% YTD through June. The MSCI World Index advanced 3.4% in the quarter, to go up 9.4% for the year; MSCI’s Emerging Markets benchmark rose 5.5% in Q2, taking its YTD gain to an impressive 17.22%.13,15

         

COMMODITIES MARKETS
Oil traded under $50 for most of the second quarter, touching a low of $42.05 before rising to finish Q2 at $46.33 on the NYMEX. Gold ended June at $1,241.40; silver, at $16.57.1,16

  

Losers outnumbered winners in the commodity sector in Q2, and some commodities took steep falls. Iron ore slid 21.37% in the quarter; sugar, 17.60%; gasoline, 11.16%; coffee, 10.95%. Other notable losses came for silver, oil, and cocoa, which were all down between 9-10% for the quarter; heating oil and natural gas gave back roughly 5%. Among the big Q2 winners: oats, up 29.32%; CBOT wheat, up 19.81%; feeder cattle, up 10.43%. Palladium picked up 4.78%; soybean oil; 3.62%; corn; 1.72%; copper, 1.66%.1

 

The animal protein and grain sectors were the best-performing portions of the commodities market in the quarter, respectively gaining 15.13% and 13.34%. The energy sector fell 7.61%; the precious metals sector, 2.09%; the base metals sector, 1.75%.1

          

REAL ESTATE
Home buying slumped in April and then rebounded during May. In the fourth month of the year, the National Association of Realtors calculated a 2.5% decline in resales – but a 1.1% May gain left them 2.7% improved over the past 12 months. That May gain happened with inventory down 8.4% year-over-year and a median existing home price 5.8% higher ($252,800) than a year before. The Census Bureau said that new home sales dropped 7.9% in April, but they rose 2.9% a month later.2,17

 

Cheap mortgages were certainly a plus. In Freddie Mac’s March 30 Primary Mortgage Market Survey, mortgage types bore the following average interest rates: 30-year fixed, 4.14%; 15-year fixed, 3.39%; 5/1-year adjustable, 3.18%. Freddie’s June 29 survey showed the following averages: 30-year fixed, 3.88%; 15-year fixed, 3.17%; 5/1-year adjustable, 3.17%.18

     

Three other closely-watched housing market indicators weakened in Q2. The Census Bureau’s monthly snapshot of housing starts and building permits showed starts down 2.8% in April and 5.5% in May as well as permits slipping 2.5% for April and 4.9% for May. The year-over-year advance on the 20-city composite S&P/Case-Shiller home price index was 5.9% in the March edition and 5.7% in the April edition (this is a famously lagging indicator). Finally, NAR’s pending home sales index took two small steps back, retreating 1.7% in April and 0.8% in May.2

      

LOOKING BACK…LOOKING FORWARD
A sustained rally with only brief, minor setbacks left the notable U.S. equity and volatility indices at the following levels at the end of Q2: S&P 500, 2,423.41; Dow Jones Industrial Average, 21,349.63; Russell 2000, 1,415.36; Nasdaq Composite, 6,140.42; CBOE VIX, 11.18. The quarterly gains for the big three are noted below; the Russell advanced 2.39% in three months, while the VIX fell 3.12%. The PHLX Oil Service Sector index brought up the rear among U.S. equity indices, staggering to a 22.54% 3-month loss.19

       

% CHANGE

Q2 CHG

Q1 CHG

1-YR CHG

10-YR AVG

DJIA

+3.32

+4.56

+19.07

+5.92

NASDAQ

+3.87

+9.82

+26.80

+13.59

S&P 500

+2.57

+5.53

+15.46

+6.12

REAL YIELD

6/30 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

0.58%

0.09%

-0.46%

2.65%

 

 


Sources: seekingalpha.com, barchart.com, bigcharts.com, treasury.gov – 6/30/171,20,21,22

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

   

With the three marquee U.S. equity indices up between 15-27% in 12 months, investors are naturally skeptical about how long stocks can maintain such powerful momentum. Bulls still rule the Street, though – and bullish analysts see more upside to this market during the rest of 2017. It is true that past performance is no guarantee of future success, but the major Wall Street indices have tended to have a good second half in the past 20 years, regardless of their first-half performance. The Dow and Nasdaq have posted second-half advances during 14 of the past 20 years, and the S&P 500 has followed suit in 13 of the past 20 years. Looking closer at the years featuring these advances, the average second-half rise was 4.31% for the Nasdaq, 3.23% for the Dow, and 2.68% for the S&P. Since 1988, the S&P has never retreated during the second half of a year when it has gained 6% or more in a first half. So, in recent stock market history, when the bulls have been ruling the Street in the first half of a year, they have tended to keep running the rest of the year. Bears might say that the bulls who embrace these statistics are suffering from recency bias, and perhaps, that argument has merit. Then again, bearish analysts have predicted an end to this bull market year after year, and still, it persists.23

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (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. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. The FTSE 100 Index is a share index of the 100 most highly capitalized companies listed on the London Stock Exchange. BSE Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted index composed of 30 stocks that started January 1, 1986. The Nikkei Asia300 Index is based on the "Asia300" group of must-watch companies selected by Nikkei. The composite index is supplemented by an index focusing specifically on companies in the ASEAN region, as well as individual indexes for 11 countries and regions. The MSCI World Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. The CBOE Volatility Index® is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. The PHLX Oil Service Sector Index (OSX) is a modified market weighted index composed of companies involved in the oil services sector. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

 

 

Citations.

1 - seekingalpha.com/article/4085358-commodities-second-quarter-overview-outlook [7/3/17]

2 - investing.com/economic-calendar/ [6/30/17]

3 - tradingeconomics.com/united-states/consumer-confidence [7/4/17]

4 - nytimes.com/2017/06/02/business/economy/jobs-report.html [6/2/17]

5 - cnbc.com/2017/07/03/june-ism-manufacturing-index.html [7/3/17]

6 - instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm [6/5/17]

7 - forbes.com/sites/laurengensler/2017/06/14/fed-raises-rates-june/ [6/14/17]

8 - money.cnn.com/2017/06/28/news/economy/fed-stress-test-wall-street-results/index.html [6/28/17]

9 - investors.com/news/draghi-drama-undercuts-key-stock-market-support/ [6/29/17]

10 - nytimes.com/reuters/2017/07/03/business/03reuters-global-economy.html [7/3/17]

11 - cnbc.com/2017/06/29/china-manufacturing-accelerates-in-june-with-official-pmi-at-51-point-7-beating-expectations-for-51-point-0.html [6/29/17]

12 - ig.com/au/view-ig/2017/07/04/stock-markets-in-2017--a-good-first-half-38915 [7/4/17]

13 - foxbusiness.com/features/2017/06/30/europe-markets-european-stocks-close-in-red-germanys-dax-hobbled-by-bayer.html [6/30/17]

14 - asia.nikkei.com/Business/AC/Bets-on-Modi-s-reforms-help-India-stocks-beat-peers-in-first-half [6/30/17]

15 - msci.com/end-of-day-data-search [6/30/17]

16 - money.cnn.com/data/commodities/ [6/30/17]

17 - inman.com/2017/06/21/consumer-resilience-boosts-may-existing-home-sales/ [6/26/17]

18 - freddiemac.com/pmms/archive.html [7/4/17]

19 - barchart.com/stocks/indices#/viewName=performance [6/30/17]

20 - barchart.com/stocks/indices#/viewName=performance [3/31/17]

21 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]

21 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]

21 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]

21 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]

21 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]

21 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]

22 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [7/3/17]

23 - cnbc.com/2017/06/30/chances-for-second-half-stock-market-gains-are-good.html [6/30/17] 

 


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