Tag: earnings results

The Markets

Whether it was Fed-induced relief, anticipation of one of the world’s largest IPOs, or anticipation of the tech world’s largest iPhone ever (so far), something put equities investors back in a record-setting mood once again last week–at least those who were interested in large-cap stocks. The S&P 500 and Dow industrials hit their 34th and 18th all-time record highs of 2014 respectively, while the Nasdaq was basically flat and the small caps of the Russell 2000 saw a loss.

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 Federal Reserve’s monetary policy committee reaffirmed its “considerable time” estimate for starting to raise interest rates once its bond-buying program ends in October (absent any economic surprises). However, increases could be steeper than previously thought. A majority of members expect the Fed funds interest rate (the rate at which banks lend to one another) to rise to almost 1.4% by the end of next year, almost 2.9% by December 2016, and 3.75% a year later. Only three months ago, the 2015 and 2016 rate forecasts were 1.125% and 2.5%. The Fed also will keep reinvesting the proceeds of its existing holdings until rates begin to rise, and will begin to test using so-called reverse repo agreements (essentially a type of money-market instrument) as part of its strategy for raising rates.
• Falling energy costs in August, including gas prices, more than offset higher prices for food and shelter, leaving the consumer inflation rate down 0.2% for the month. According to the Bureau of Labor Statistics, that left the CPI-U index up only 1.7% for the last 12 months–well within the Federal Reserve’s target range. Meanwhile, the BLS said final-stage wholesale prices remained essentially flat for the month, with a 1.8% inflation rate for the last year.
• As the summer wound down in August, housing starts and building permits slowed but remained higher than the previous summer. The Commerce Department said housing starts were down 14.4% for the month but were 8% higher than in August 2013, while despite a 5.6% decline in August, building permits were 5.3% higher than a year earlier.
• U.S. manufacturing data was mixed. While the Philly Fed index continued to show growth, the pace retreated a bit from its three-year high of the previous month, slipping from 28% to 22.5%. Also, the Fed’s gauge of industrial production nudged downward 0.1% in August–the first decline since January–and its July gains were revised downward. However, the Fed’s Empire State index rose to its highest level since October 2009, going to 27.5% from 14.7%.
• The Conference Board’s index of leading economic indicators continued to rise in August, though the 0.2% increase represented a more sluggish pace than during the previous two months. The Conference Board said housing permits and business spending on capital equipment held back the index.
• (Still) a united kingdom: Scotland voted to remain part of the UK. After an initial relief rally, the British pound saw a post-vote pullback that left it little changed from before Thursday’s election.
• Economic data from China showed slowing in some key areas of the country’s economy. Though industrial production was up 6.9% in August from a year ago, that was down substantially from July’s 9% increase. Also, housing sales were down nearly 11% since the beginning of the year. However, interest in Chinese economic data paled in comparison to the attention paid to the IPO of Alibaba, reportedly one of the world’s largest ever.

Eye on the Week Ahead

With the Fed meeting, the Scottish independence vote, and Alibaba’s IPO now in the rear-view mirror, housing stats plus the final Q2 GDP number will give investors some economic data to focus on.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: 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.

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.

The Markets

The record-breaking march of the stock market faltered last week, as all indices posted losses. Perhaps the setback was due to a lack of economic influences, or because investors were nervously anticipating the results of next week’s Federal Open Market Committee (Fed) meeting, wondering whether Chair Janet Yellen will indicate a leaning toward higher rates. Or perhaps, as some observers believe, it was just time for a mild adjustment. Yields on the 10-year Treasury jumped to their highest point since early July.

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

• Job openings remained near a 13-year high in July 2014, according to the Bureau of Labor Statistics (BLS). At 4.7 million, the number of open jobs changed very little from a month earlier. The hire rate (3.5%) held steady from June. The number of hires inched upward to approximately 4.9 million in July from nearly 4.8 million in June, reaching the highest level since December 2007.
• In a prime-time address to the nation Wednesday night, President Obama announced an expanded effort to “degrade, and ultimately destroy” the Islamic State of Iraq and Greater Syria, or ISIS. Details included expanding airstrikes in Iraq, introducing airstrikes in Syria, and sending additional troops to Iraq for training and advisory missions.
• The Commerce Department reported that sales by wholesalers rose 0.7% from June to July, and were up 7.5% from a year earlier. Inventories inched up 0.1% from June, and were up 7.9% from a year earlier.
• Consumers shopped at their strongest rate since April, also according to the Commerce Department. Retail sales rose 0.6% from July to August, to a total $444.4 billion. Sales were 5% higher than one year ago.
• The United States joined the European Union in imposing further sanctions on Russia Friday, with impacts on Russian interests in the energy, banking, and defense sectors.

Eye on the Week Ahead

This week promises to make up for last week’s trickle of economic data. Investors will have an eye on industrial production; inflation, manufacturing, and housing data; international capital flows; Wednesday’s Fed meeting; leading economic indicators; and any changes in trading volume due to this quarter’s quadruple witching options expiration at the end of the week.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: 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.

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.

The Markets

Amid a flood of mostly positive economic data and what at first blush appears to be good news from Ukraine, nearly all market sectors finished the short week in positive territory. Even surprises from the European Central Bank and Friday’s jobs numbers seemed to have minimal impact on investors, as the S&P 500 continued its record-breaking run.

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 manufacturing sector reported its strongest economic reading since March 2011. The Institute for Supply Management’s Purchasing Managers Index (PMI) came in at 59% for August, up 1.9 points from July’s reading of 57.1%. Part of the increase was due to record levels in the New Orders Index, which registered its highest reading in more than a decade.
• The positive results in new orders was echoed by the U.S. Census Bureau, which reported that new orders for manufactured goods rose by a record-setting 10.5% in July, the highest reported increase in 22 years. Manufactured goods orders have risen in five of the last six months. Shipments, unfulfilled orders, and inventories also hit record levels. Transportation equipment saw a 74.1% increase, and was the reason for the unprecedented rise. Excluding transportation, new orders actually fell by 0.8%.
• New records were also reported in auto sales, as manufacturers noted sales of nearly 1.6 million cars and trucks in August. Sales are on pace to reach 17.5 million this year, a level not seen since July 2006. Industry observers said that much of the increase was due to low interest rates and other incentives.
• Construction rose by 1.8% in July to a seasonally adjusted annual rate of $981.3 billion, according to the U.S. Census Bureau. The figure is 8.2% higher than a year earlier. Through July, construction spending totaled $535.4 billion, nearly 8% higher than the $496.3 billion spent during the same time frame in 2013. Growth was led by nonresidential private construction and public construction, particularly highways.
• The Federal Reserve’s beige book report was generally favorable, stating that economic activity had expanded since the previous report and noting that “none of the Districts pointed to a distinct shift in the overall pace of growth.” Notable areas of growth included consumer spending, auto sales, and tourism.
• The Commerce Department announced that the trade deficit shrank to $40.5 billion in July, down from $40.8 billion in June. Exports rose by $1.8 billion, while imports rose by $1.5 billion.
• The European Central Bank (ECB) surprised observers Thursday with the announcement that it would cut all interest rates, and launch programs to buy asset-backed securities and euro-denominated covered bonds. Details surrounding the new programs will be provided at the ECB’s October meeting. In announcing the moves, ECB President Mario Draghi said, “These decisions will add to the range of monetary policy measures taken over recent months,” adding that they reflect significant differences in monetary policy cycle among the eurozone’s major advanced economies. He also noted that the moves will “support the provision of credit to the broader economy.”
• Labor productivity (output per hour) rose 2.3% during the second quarter of 2014, while the costs of labor edged down 0.1%. During the quarter, hours worked rose 2.6% and output increased 5%. Productivity increased 1.1% from second quarter 2013 to second quarter 2014. Unit labor costs increased 1.7% over the previous four quarters.
• After months of positive news, the Labor Department reported disappointing job growth for August, and revised figures downward for earlier this summer. Despite an unemployment rate that continued to decline–down to 6.1% in August from July’s 6.2%–nonfarm jobs rose by just 142,000 in August. For the previous 12 months, nonfarm payrolls increased by 212,000, on average. After accounting for revisions in both June and July, the total number of added jobs in those months was 28,000 less than previously reported.
• Ukraine and pro-Russian rebels signed a truce that took effect Friday evening, local time, in what observers hope will be the beginning of the end of the five-month conflict. Friday also brought news of a new “spearhead” force of several thousand land troops agreed to by NATO allies to address growing threats in the Middle East and other areas, if needed.

Eye on the Week Ahead

In a week that promises minimal influence in the way of economic data, investors may be watching events abroad, particularly to see whether the Ukrainian cease-fire agreement holds.

The Markets

Investors brushed off geopolitical fears last week and regained their appetite for risk, taking the S&P 500 to its 32nd record high of the year and returning the small-cap Russell 2000 to positive territory for 2014. Meanwhile, the yield on the benchmark 10-year Treasury hit a level it hasn’t seen in more than a year as higher demand pushed prices up.

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 U.S. economy grew slightly faster during the second quarter than previously thought. The Bureau of Economic Analysis said the 4.2% figure for gross domestic product was revised upward from 4% primarily because of a higher figure for commercial construction and business investment in equipment. Meanwhile, corporate after-tax profits rebounded from a -16.3% decline in Q1, rising 8.3% during Q2.
• A 318% increase in orders for commercial aircraft led to a 22.6% surge in durable goods orders in July. The Commerce Department said that excluding transportation, orders actually fell 0.8%, while business investment in equipment was down 0.5% after a strong gain the previous month.
• Sales of new homes fell 2.4% in July, according to a Commerce Department report. That raised questions about the state of the housing market, especially since the National Association of Realtors^® had reported the previous week that home resales had actually risen 2.4% during the month.
• Meanwhile, home prices showed continued signs of leveling off in cities measured by the S&P/Case-Shiller 20-City Composite Index. Though the index gained 1% in June and was up 8.1% year-over-year, all 20 cities experienced slower annual growth rates for the first time since February 2008. An S&P spokesman predicted that mortgage rate increases, anticipated next year, “will further dampen price gains.”
• Americans spent less and saved more in July as income growth slowed. The Commerce Department reported that consumer spending was down 0.1%, in part because of reduced auto and department store sales, while incomes rose 0.2% rather than the 0.5% seen during the previous two months. As a result, the savings rate hit 5.7%–its highest level since late 2012.
• Burger King became the latest company to draw fire for so-called “tax inversion” by announcing it is negotiating to buy Canadian chain Tim Hortons. The agreement would allow Burger King to move its headquarters to Canada and reduce its corporate tax burden.
• The inflation rate in the eurozone continued to slide, hitting 0.3% in August. The decline, coupled with European Central Bank President Mario Draghi’s stated willingness to consider additional economic stimulus, prompted speculation that the ECB could take action at its next meeting on September 4. The eurozone unemployment rate was 11.5%, down only slightly from a year earlier.

Eye on the Week Ahead

In addition to monitoring an onslaught of economic data, global investors will look to the European Central Bank’s Thursday meeting for possible stimulus measures similar to the ones the Federal Reserve has been winding down.

The Markets

Last week domestic equities managed to build on the gains of the week before. The Dow industrials finally returned to positive territory for the year, and the Nasdaq had the kind of weekly gain it hasn’t seen since late May. Meanwhile, geopolitical tensions helped spur interest in the relative safety of the benchmark 10-year Treasury, cutting the yield to its lowest level since June 2013.

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

• Auto and department store sales declined in July, while grocery stores, gas stations, restaurants, clothing stores, and building supply stores all saw gains. That left total retail sales essentially flat for the month, though the Commerce Department said they were up nearly 4% from a year earlier.
• Wholesale prices rose 0.1% in July, according to the Bureau of Labor Statistics. That was slightly less than June’s 0.4% increase, and cut the annual wholesale inflation rate for the last 12 months to 1.7% from June’s 1.9%. The biggest monthly increases were seen in transportation and warehousing, which were up 0.5%, while wholesale food costs rose 0.4% and energy prices fell 0.6%.
• Led by a 10.1% increase in auto manufacturing, U.S. industrial production rose 0.4% in July, according to the Federal Reserve. The overall increase represented the sixth straight monthly gain. Even aside from the surge in autos, production was up 0.2%, and the percentage of the nation’s manufacturing capacity that’s being used rose to 79.2%.
• After the Fed’s Empire State manufacturing survey hit a four-year high, the August report showed that improvement had slowed substantially as the reading fell 11 points to 14.7.
• Sluggish economic recovery in the 18-member eurozone stalled completely during Q2 as growth fell from 0.2% in Q1 to 0. More worrisome was the -0.2% decline in both the German and Italian economies, which are two of the tentpoles of the region’s economy. The larger 28-member European Union saw a 0.2% increase in gross domestic product, and the official EU statistics agency said GDP had risen in both areas compared to a year earlier (0.7% for the eurozone and 1.2% for the EU).

Eye on the Week Ahead

Speeches at the Fed’s annual Jackson Hole conference could influence markets given the internal debate over the timing of interest rate hikes. Investors will continue to monitor the situations in Ukraine, Gaza, and Iraq, and housing and consumer inflation data also are on tap.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: 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.

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.

The Markets

Investor indecision about the future of equities prices, coupled with light summer trading volumes, led to volatility across the board last week. Friday’s 186-point rally gave the Dow some relief after two down weeks, though not enough to nudge the index into positive territory for the year. The small caps of the Russell 2000 had their strongest week since early July, though they also remained down year-to-date. Meanwhile, geopolitical tensions increased demand for the relative security of the benchmark 10-year Treasury bond, sending its yield down. However, riskier high-yield bonds saw some selling pressure.

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

• Growth in the U.S. services sector accelerated in July. The Institute for Supply Management’s gauge of activity in service industries rose 2.7% to 58.7%–its highest level since the index was launched in 2008.
• New orders at U.S. manufacturers were up 1.1% in June. The Commerce Department said the gain boosted factory orders to their highest level since record-keeping began in 1992 and that June was the fourth month of the last five to see an increase.
• A drop in oil imports helped cut the U.S. trade deficit by 7% in June, according to the Commerce Department. U.S. exports rose 0.1% to their highest level on record, while imports dropped 1.2%.
• Italy’s economy fell back into recession, falling 0.2% in Q2; it was the second consecutive quarterly contraction. The GDP of the eurozone’s third largest economy also was down 0.3% from the same quarter a year earlier.
• In retaliation for new European Union and U.S. economic sanctions, Russia imposed a one-year ban on a variety of food imports and said it’s considering prohibiting EU and U.S. flights from Russian airspace over Siberia.
• As expected, the European Central Bank left key interest rates unchanged. President Mario Draghi said measures already adopted are having an effect and that it was too early to assess the potential impact of Russia’s ban on European food imports.
• Eleven of the largest U.S. banks must rewrite their proposed plans for handling a potential bankruptcy. The Federal Reserve and Federal Deposit Insurance Corp. said the plans contained “no credible or clear path” to achieve an orderly failure and avert any need for the type of bailouts provided during the 2008 financial crisis. The banks have until July 2015 to submit revised so-called “living wills.”
• Fair Isaac Corp. said it will change the way it calculates credit scores, underweighting unpaid medical bills and excluding overdue bills that are subsequently paid or settled with a collection agency. The changes could make it easier to get credit.

Eye on the Week Ahead

With the Q2 earnings season winding down, retail sales and wholesale inflation data will vie with global conflicts for investor attention. Speeches by two members of the Fed’s monetary policy committee are likely to review the arguments for and against accelerating an interest rate hike. Finally, options expiration at week’s end plus trading volumes that are likely to remain relatively low could mean additional volatility.

The Markets

A strong GDP report, generally positive corporate earnings, and a slightly more optimistic outlook from the Fed couldn’t offset the ongoing stream of bleak news about geopolitical problems and investor desire to take some money off the table. The Russell 2000’s recent losing streak spread to the large caps as the S&P 500 had its worst week of the year. Argentina’s default on sovereign debt helped prompt a selloff on Thursday, which cut 317 points from the Dow and sent it back into negative territory for the year.

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 initial estimate of 4% U.S. economic growth in Q2 showed a strong rebound from Q1’s 2.1% contraction. However, the Bureau of Economic Analysis’s initial estimate is subject to revisions over the next two months (for example, the initial Q1 estimate showed a 0.1% gain). Increases in exports and consumer spending (especially on durable goods) as well as more business inventory investment and state/local government spending drove the gains in gross domestic product.
• The unemployment rate ticked up slightly to 6.2% in July but was still at its lowest level in almost six years and more than a full percentage point below a year earlier. The Bureau of Labor Statistics also said the 209,000 new jobs added to payrolls in July roughly equaled the average monthly job gains over the last year; though that’s down from the pace of the last three months, July was the sixth straight month in which 200,000+ new jobs have been added.
• Home prices continued to improve, but at a slower pace. All the cities in the S&P/Case-Shiller 20-City Composite Index report issued last week saw increases, but the 9.4% increase over last May was down from the previous month’s 10.8% year-over-year gain.
• The Federal Reserve’s monetary policy committee continued to reduce its bond purchases, cutting them to $25 billion a month. The Federal Open Market Committee statement noted increased spending by both consumers and businesses as well as improvements in employment, though it also said there continues to be slack in the labor market. It also said that as long as inflation remains below 2%, its target interest rate is likely to remain at its current level for “a considerable time” after new bond purchases end completely. However, the moderately more positive language plus hawkish comments from one committee member helped elevate concerns about the timing of rate increases.
• Both the European Union and the United States attempted to increase pressure on Russia to end support for Ukrainian rebels. Previous sanctions have been largely directed toward individuals; the new measures are expected to affect Russian banks, the country’s oil industry, and the military. The EU agreement is designed to isolate Russia economically without hampering Europe’s fragile economic recovery.
• After Argentina failed to reach a settlement with large holders of $13 billion of sovereign bonds that have already been restructured once, Standard & Poor’s declared it in default on other interest payments. Coupled with a quarterly loss reported by Portugal’s second-largest bank, Argentina’s debt problems once again raised questions about the resilience of emerging economies.
• Trustees of the fund that finances Medicare reported that slower growth in federal health-care spending as a result of the Affordable Care Act appears to have helped delay by four years the date by which Medicare is expected to run out of money. The trustees now see that occurring in 2030. Social Security is expected to be solvent until 2033, but trustees of the Social Security Trust Fund said that unless action is taken, a shortfall might require cuts in disability benefits starting in late 2016.
• According to the Commerce Department, U.S. construction spending slumped nearly 2% in June. However, that was still 5.5% higher than in June 2013. Both public and private spending on residential and commercial building fell.
• The Institute for Supply Management said U.S. manufacturing continued to accelerate in July as its survey of purchasing managers rose to 57.1 from 55.3 (any number above 50 indicates expansion).

Eye on the Week Ahead

Investors will try to gauge whether last week’s downdraft was the start of something bigger or a much-needed breather for a lengthy bull market.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: 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.

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.

The Markets

Encouraging economic news, generally positive Q2 corporate earnings reports, and stable Federal Reserve policy had to battle multiple geopolitical conflicts for investor attention. Both the S&P 500 and Dow industrials managed to set fresh all-time highs early in July, but the S&P managed to follow through to additional records while the Dow slipped back under 17,000. After five straight positive months, both succumbed to profit-taking that left them under water for July. That handed the year-to-date lead to the Nasdaq (barely), while the small caps of the Russell 2000 gave up most of the previous month’s gains and joined the Dow in negative territory for the year. Global conflicts and instability in some emerging markets also hurt the Global Dow.

After a June rally, gold prices slid back under $1,300 an ounce in July. A stronger dollar allowed the price of oil to drop below $100 a barrel by the end of the month. Meanwhile, the benchmark 10-year Treasury yield ended the month up slightly from where it began.

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.

The Month in Review

• The U.S. economy seems to have rebounded from Q1’s 2.1% contraction, growing 4% in Q2. However, that initial estimate of gross domestic product is subject to revisions by the Bureau of Economic Analysis over the next two months (for example, the initial Q1 estimate showed a 0.1% gain). Increases in exports and consumer spending (especially on durable goods) as well as more business inventory investment and state/local government spending drove the GDP gains.
• The unemployment rate remained at its lowest level in almost six years (6.2% in July), which is more than a full percentage point below a year earlier. The Bureau of Labor Statistics also said the 209,000 new jobs added to payrolls in July roughly equaled the average monthly job gains over the last year.
• Manufacturing data was generally encouraging. New orders for U.S. manufacturers were at their highest level since late 2013, according to the Institute for Supply Management, and the ISM’s gauge of the services sector showed growth continuing, though at a slightly more moderate pace. Durable goods orders, especially business orders for capital equipment, rebounded from a May slump, and the Federal Reserve said U.S. manufacturing output rose for the fifth straight month.
• The housing market showed signs of fatigue. According to the Commerce Department, sales of new homes plunged more than 8% in June and were 11.5% lower than a year earlier. Home prices measured by the S&P/Case-Shiller 20-City Composite Index continued to improve, but the 9.4% increase over last May represented a slower pace than in April. And wet weather in the South helped slow housing starts by 9.3%. However, the National Association of Realtors^® said home resales were up 2.6% for the month.
• Both the European Union and the United States tried to increase pressure on Russia to end support for Ukrainian rebels by adopting new measures that are expected to affect Russian banks, the country’s oil industry, and the military.
• Higher gas prices helped send consumer inflation up 0.3% and wholesale prices up 0.4% in June. That put annual inflation rates at 2.1% (consumer) and 1.9% (wholesale), according to the Bureau of Labor Statistics. Meanwhile, retail sales rose 0.2% in June, though the Commerce Department doesn’t adjust the figures for price increases such as those seen in food costs.
• The Securities and Exchange Commission announced new rules governing money market mutual funds that are intended to guard against a sudden run on such funds. The rules, which will be implemented over time, will require a floating net asset value for funds serving institutional investors (those serving individuals will continue to strive for a stable $1 per share price, though there will continue to be no guarantees that they will always do so). The SEC also would allow non-governmental money market funds to impose restrictions during a crisis to deter withdrawals.

Eye on the Month Ahead

The dog days of August will likely keep trading volumes light, which can sometimes heighten volatility. The Federal Reserve will pause its Great Unwind of quantitative easing, likely picking up again in September, and global conflicts could continue to counterbalance any economic good news.