Markets March Ahead

Last week, markets marched ahead within a busy reporting week. The Dow rose 1.16% to close Friday on another new high.[i] The S&P 500 notched a record high during the week, despite closing the week slightly down 0.02%.[ii] Meanwhile, the NASDAQ slipped 0.20%, and the MSCI EAFE rose 0.21%.[iii]

Generally strong corporate earnings reports helped markets continue to hit highs. The majority of companies that have posted Q2 earnings so far have beaten their estimates. Those earnings performances helped push financials, materials, and energy stocks up by over 1% early in the week.[iv] Health care companies also posted substantial earnings as S&P 500 health care stocks have risen 16% this year. Health insurer stocks have also increased by 22%.[v]

Additionally, Q2 Gross Domestic Product (GDP), consumer confidence, exports, housing, and oil all reported noteworthy developments.

A Rundown of Last Week’s Developments

  • Solid GDP Performance: For the second quarter, GDP came in at a 6% annualized rate—one of the strongest quarters in the last 2 years.[vi] GDP growth was based on robust consumer spending for durable and nondurable goods. In addition, business investment hit a solid 5.2% annualized increase for the quarter.[vii]
  • Healthy Consumer Confidence: Consumer confidence remains quite high with the index rising in July almost 4 points to 121.1. The index beat the optimistic estimate of 118 and has jumped approximately 20 points since last November’s election, staying near March’s 17-year high of 124.9.[viii] In addition, the consumer sentiment index moved up modestly the last two weeks of July to end at 93.4.[ix]
  • Decent Export and Import Numbers: Food products and capital goods helped exports rise by 1.4% in June. Further, wholesale and retail inventories both jumped 0.6%. Imports, however, fell 0.4% on lower industrial supplies and consumer goods.[x]
  • Mixed Home Sales: A tight labor market and low mortgages continue to spur demand for housing. In June, new home sales recorded a strong 610,000 annualized rate.[xi] Meanwhile, existing home sales dropped 1.8% in June to an annualized rate of 5.5 million, which was lower than anticipated. Existing home prices, however, were up 6.5% year-over-year, with a median price of $263,800.[xii]
  • Better Oil Prices: Oil prices rose this week, hitting the highest weekly percentage gains this year. Prices strengthened with news of shrinking U.S. crude and gas inventories, along with foreign efforts to reduce output.[xiii]

What Lies Ahead

The Fed observed in its meeting last week that risks to the economic outlook seem stable.[xiv] In its analysis of the economy, the Fed pointed to moderate economic growth, a sturdy employment environment, and positive business investments.[xv] As expected, the Fed did not increase interest rates but suggested that unwinding its $4.5 trillion balance sheet could begin as early as September.[xvi]

This week will again offer key economic data to help provide a better understanding of market performance in June and early indicators for July.[xvii] As always, we are here to answer any questions you may have about our economy and your financial life.

ECONOMIC CALENDAR

Monday: Pending Home Sales Index
Tuesday: Motor Vehicle Sales, Personal Income and Outlays, PMI Manufacturing Index, Construction Spending
Wednesday: ADP Employment Report
Thursday: Factory Orders
Friday: Employment Situation, International Trade

DATA AS OF 7/28/2017

1 WK

SINCE 1/1/17 1 YR 5 YR

10 YR

STANDARD & POOR’S 500 -0.02% 10.42% 13.92% 12.27% 5.42%
DOW 1.16% 10.46% 18.28% 10.79% 5.11%
NASDAQ -0.20% 18.42% 23.66% 16.60% 9.54%
INTL 0.21% 14.71% 16.50% 6.26% -1.26%
DATA AS OF 7/28/2017 1  MO 6  MO 1  YR 5  YR 10  YR
TREASURY YIELDS (CMT) 1.00% 1.13% 1.22% 1.83% 2.30%

Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

1859113AL_JUL19

[i] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US

https://www.cnbc.com/2017/07/28/us-stocks-tech-amazon-gdp.html

[ii] http://www.cnbc.com/2017/07/25/us-stocks-earnings-fed-caterpillar-mcdonalds.html

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

[iii] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

https://www.msci.com/end-of-day-data-search

[iv] https://www.cnbc.com/2017/07/25/us-stocks-earnings-fed-caterpillar-mcdonalds.html

[v] https://www.bloomberg.com/news/articles/2017-07-27/obamacare-chaos-in-washington-leaves-health-investors-unfazed?cmpid=BBD072717_MKT&utm_medium=email&utm_source=newsletter&utm_term=170727&utm_campaign=markets

[vi] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=482414&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[vii] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477653&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[viii] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477926&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[ix] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477848&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[x] http://wsj-us.econoday.com/byshoweventfull.asp?fid=478559&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[xi] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477962&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[xii] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477938&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[xiii] https://www.cnbc.com/2017/07/27/oil-climbs-for-sixth-day-near-8-week-highs-on-us-crude-stock-declines.html

[xiv] https://www.bloomberg.com/news/articles/2017-07-26/dollar-drops-bonds-climb-on-fed-s-inflation-view-markets-wrap

[xv] http://wsj-us.econoday.com/byshoweventfull.asp?fid=475715&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[xvi] https://www.cnbc.com/2017/07/26/fed-leaves-rates-unchanged.html?__source=newsletter%7Ceveningbrief

[xvii] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=482414&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top