The Markets

After generally positive economic data once again suggested that the economy really did begin to rebound this spring, the Dow industrials surpassed 17,000 for the first time, while the S&P 500 hit three new all-time records during the week. And as investors embraced stocks, worries about the potential impact of a strong economy on potential Fed rate increases also sent the benchmark 10-year Treasury yield up and the price down.

Market/Index	2013 Close	Prior Week	As of 7/4	Weekly Change	YTD Change
DJIA	16576.66	16851.84	17068.26	1.28%	2.97%
Nasdaq	4176.59	4397.93	4485.93	2.00%	7.41%
S&P 500	1848.36	1960.97	1985.44	1.25%	7.42%
Russell 2000	1163.64	1189.49	1208.15	1.57%	3.83%
Global Dow	2484.10	2603.77	2638.59	1.34%	6.22%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.04%	2.54%	2.65%	11 bps	-39 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 unemployment rate fell to 6.1% in June; that’s 1.4% lower than a year earlier and the lowest level in almost six years. The economy added 288,000 new jobs during the month, higher than the 272,000 monthly average since March. The data, coupled with upward revisions to payroll figures for April and May, suggested possible acceleration in job growth. The Bureau of Labor Statistics said the widespread job gains were led by professional/business services, retail, restaurants/bars, and health care.
• A 2% increase in new orders placed with U.S. manufacturers put orders at their highest level since late 2013. Even though the Institute for Supply Management’s index showed that manufacturing growth didn’t accelerate in June, it still remained at a healthy 55.3% reading (any number above 50 represents expansion). The ISM’s measure of the services sector also showed slightly slower growth than the previous month, though the reading remained at a robust 56.3%.
• After three straight monthly increases, new orders for U.S. manufactured goods slipped 0.5% in May, though most of the decline was in the volatile transportation sector. The Commerce Department also said inventories were at their highest level on record and have increased 18 of the last 19 months.
• Commercial construction spending rose 1.1% in May, but the Commerce Department said that was largely offset by a 1.4% drop in the value of new home projects. The 0.1% overall increase in construction spending was weaker than April’s 0.8% gain, but the annual rate was 6.6% higher than a year ago.
• As expected, the European Central Bank left two key interest rates unchanged, hoping that measures taken last month will be enough to help stimulate the economy.
• Higher auto-related exports and less spending on imported oil and consumer goods helped cut the U.S. trade deficit by 5.5% in May to $44.4 billion, according to the Bureau of Economic Analysis.
• The U.S. Supreme Court ruled that closely held, for-profit companies can choose to opt out of a provision of the Affordable Care Act that requires that employees’ insurance include coverage for birth control. The court also ruled that workers who aren’t full-fledged public employees cannot be required to pay fees to a union even if they benefit from its collective bargaining efforts.
• Two separate assessments suggested that China’s sluggish manufacturing sector may be rebounding. The reading on the Chinese government’s purchasing managers’ index nudged up slightly to 51 in May. Meanwhile, HSBC/Markit’s Manufacturing PMI was basically flat but stayed in expansion territory, apparently responding to small steps taken by the government to stimulate economic growth.

Eye on the Week Ahead

In a week that’s light on fresh economic reports, investors may begin to focus on the Q2 earnings season, which has its unofficial start on Tuesday when Alcoa reports. Minutes of the most recent Federal Open Market Committee meeting could shed new light on the debate over whether the Fed should be concerned yet about inflation.