What I’m Watching This Week – 1 September 2015

The Markets (as of market close August 28, 2015)

The latest stock sell-off in China sent U.S. stocks reeling at the beginning of the week. However, good economic news spurred by a favorable GDP report shifted momentum as stocks rallied to close ahead of last week. For the week, the Dow and Nasdaq were the biggest gainers. However, of the major markets listed here, only the Nasdaq remains in positive territory year-to-date.

The price of gold (COMEX) lost a bit, selling at about $1,133.30 by late Friday afternoon compared to $1,159.90 a week earlier. Crude oil (WTI) prices ended the week up, selling at $45.33/barrel by week’s end. The national average retail regular gasoline price decreased from $2.716 per gallon on August 17, 2015, to 2.637 on August 24–a drop of $0.079–$0.817 below a year ago.

Market/Index 2014 Close Prior Week As of 8/28 Weekly Change YTD Change
DJIA 17823.07 16459.75 16643.01 1.11% -6.62%
Nasdaq 4736.05 4706.04 4828.32 2.60% 1.95%
S&P 500 2058.90 1970.89 1988.87 0.91% -3.40%
Russell 2000 1204.70 1156.79 1162.91 0.53% -3.47%
Global Dow 2501.66 2368.40 2373.32 0.21% -5.13%
Fed. Funds 0.25% 0.25% 0.25% 0% 0%
10-year Treasuries 2.17% 2.04% 2.18% 14 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

  • Real gross domestic product increased at an annual rate of 3.7% in the second quarter of 2015, according to the “second” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.6%. The latest GDP estimate is based on more complete source data than was available for the “advance” estimate issued last month. The second quarter’s increase was driven, in part, by an upturn in business investment (spending on construction, equipment, and R&D), exports, and personal consumption.
  • Personal income enjoyed a healthy increase last month. However, consumers appeared to focus on saving rather than spending. Compared to June, personal income increased $67.1 billion, or 0.4%, and disposable personal income (DPI) increased $61.5 billion, or 0.5%, in July, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $37.4 billion, or 0.3%. It’s important to note that this data came before fears of a slowing Chinese economy, and the downturn in oil prices.
  • For the week ended August 22, new claims for unemployment insurance dropped 6,000 to 271,000. For the week ended August 15, the seasonally adjusted insured unemployment rate was 1.7%, representing about 2.27 million continuing claims for unemployment insurance.
  • Consumer confidence rebounded in August from July, according to The Conference Board’s Consumer Confidence Index. For August, the index came in at 101.5, compared to July’s 91.0. Lynn Franco, Director of Economic Indicators at The Conference Board said, “Consumers’ assessment of current conditions was considerably more upbeat, primarily due to a more favorable appraisal of the labor market.”
  • The housing market continues to flourish. Sales of new single-family houses in July were at a seasonally adjusted annual rate of 507,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. This is 5.4% above the revised June rate of 481,000 and 25.8% above the July 2014 estimate of 403,000. The median sales price of new houses sold in July 2015 was $285,900; the average sales price was $361,600. The seasonally adjusted estimate of the number of new houses for sale at the end of July was 218,000. Demand has picked up as the supply of available new homes for sale has dropped to 5.2 months, down from 5.3 months in June, and 6.1 months at the end of July 2014.
  • The National Association of Realtors® reported that pending home sales based on contract signings for existing homes (not new construction) increased 0.5% in July compared to June. The index, at 110.9, is 7.4% above July 2014.

Eye on the Week Ahead

China has been proactive in trying to quell the economic turmoil that has impacted its own stock market and the markets of other countries, including the United States. Will the stock markets recover, or are we in for what may be a legitimate market correction? The first week of September focuses on industrial productivity, international trade, and the employment situation.