Markets lost some momentum on slow trading and ended the week mixed. Despite the sluggish behavior, equities are up strongly for the quarter and the S&P 500 is poised for its longest rally since 1998. While the S&P lost 0.10% and the Dow fell 0.56%, the Nasdaq managed a gain of 0.68%.
Economic data was largely unsurprising last week. A dismal first quarter GDP update didn't faze investors who regarded it as old news. While Q1 GDP growth fell to -2.9%, investors blamed the contraction on the unusually cold weather and cuts to healthcare spending. On the other hand, lukewarm consumer spending in May caused economists to trim economic growth expectations for the second quarter. Despite the poor showing, analysts admitted that challenges in calculating healthcare spending might have artificially lowered spending numbers.
On the geopolitical front, the Ukrainian government in Kiev signed historic free trade agreements with the EU, Georgia, and Moldova, integrating the economies of the three former Soviet-Bloc countries more closely with Europe, and potentially paving the way for future entry into the EU. The move immediately drew threats from Russian leaders, who are worried about losing control over their neighbors. Although the situation is far from resolved, we can hope that the threat of further economic sanctions will cause Russia to back down.
As the clock ticks down on the second quarter, investors are looking ahead for economic data to support hopes that economic activity picked up in the last three months. The short trading week is packed with economic releases, including the June Employment Situation report and a speech by Fed chair Janet Yellen.
On behalf of all of us here, may your extended holiday weekend be filled with friends, family, and fun!
Monday: Chicago PMI, Pending Home Sales Index, Dallas Fed Mfg. Survey
Tuesday: Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg. Index, Construction Spending
Wednesday: ADP Employment Report, Factory Orders, EIA Petroleum Status Report, Janet Yellen Speaks 11:00 AM ET
Thursday: Employment Situation, International Trade, Jobless Claims, ISM Non-Mfg. Index
Friday: U.S. Markets Closed for Independence Day Holiday
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Federal student loan rates rise on July 1. Legislation that ties student loan rates to prevailing market rates means that federal loan rates will reset on July 1. Visit studentaid.ed.gov for more information on loan rates.
Consumer sentiment rises in June. A final reading of June sentiment shows that consumers felt more optimistic about the economy in June and are upbeat about their future prospects. Hopefully, these positive feelings will be seen in higher Q2 consumer spending.
Rising food and fuel prices drag on consumers. Rising demand, drought, and global oil uncertainties are causing prices on gasoline and food to rise around the country. Prices on meat, dairy, and even coffee are up, and producers are passing those costs on to consumers. If Americans continue to take a hit at the pump or grocery store, it could cause consumer spending to fall later this year.
Sales of new and existing homes rise in May. Home resales rose more than expected in May and the inventory of properties was the highest it's been in 1-1/2 years. New home sales skyrocketed to a six-year high, though the smaller sample size makes this measure more volatile. While it's too soon to know for certain, these numbers suggest that the housing market may be recovering from its slump.
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The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
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