Rover's Weekly Market Brief — 7/29/2016

July 29, 2016 |

Indices

DJIA: 18,432.20 (-0.75%)

NASDAQ: 5,162.13 (+1.22%)

S&P 500: 2,173.60 (-0.07%)

Commodities

Gold: 1,357.30 (+2.56%)

Copper: 222.45 (-0.49%)

Crude Oil: 41.46 (-6.18%)

Economy

Q2 GDP was weak coming in at only a plus 1.2 percent annualized rate. However, upon closer look there were positive signs. Consumer spending grew 4.2 percent, more than doubling Q1’s rate of 1.6. A negative in this report but a plus for the economy is slowing inventory accumulation. Lean inventories suggest new accumulation to come which is good for future employment and production. Net imports grew a strong 1.4 percent, reflecting the first gain in exports since Q2 2015. On the negative side, there was a reversal in residential investment, falling at an annualized 6.1 percent, and nonresidential fixed investment, which fell at a 2.2 percent rate. These two weaknesses indicate decreased business confidence and future trouble for productivity growth. Ending on a positive note, final demand came in at double the Q1 rate and low inventories and consumer momentum look good for Q3.

New home sales came in strongly, with a 592,000 annualized rate in June, compared to the revised rate of 572,000 in both May and April. This also represents a 25% improvement Y/Y. All regions were up, but the midwest the strongest with a 44% Y/Y increase. Prices also increased, with a 6.2% jump in the median price M/M, which was actually a slightly higher jump than the Y/Y growth of 6.1%. The supply of new homes for sale is not keeping pace, however, with new homes for sale increasing just 1.2% M/M.

Wednesday’s Federal Open Market Committee (FOMC) meeting revealed that the committee is becoming slightly more hawkish after June’s strong employment report. The committee voted 9 to 1 to keep the federal funds rate between 0.25 and 0.50 (as opposed to last month’s unanimous vote), and left open the possibility for a rate hike in September if job growth and consumer spending remain solid. The statement did not mention Brexit but did say that global developments were being monitored.

Looking Ahead

Upcoming Economic Reports:

Tues August 2 — Personal Income & Outlays (gauge of consumer sector)

Fri August 5 — Employment Situation (key indicator of economic activity)

Earnings Calendar:
Monday Tuesday Wednesday Thursday Friday
MTU PFE HSBC KHC BRK.B
HEINY PG NTT SIEGY NVO

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