August 15th – Weekly Update

  • U.S. stocks had a choppy week, reaching new highs on central bank support, then stumbling on lackluster retail sales but still eking out slight gains. European and Asian bourses also gained. Oil rose on speculation that OPEC might restart production freeze talks. Gold was flat for the week. The ten-year U.S. Treasury yield declined to about 1.5%.
  • With 91% of S&P 500 companies having reported second quarter results, 70% have beaten earnings expectations and 54% have beaten sales expectations. According to FactSet, the second quarter blended earnings rate is -3.5%, marking the first time the index has sustained five consecutive quarters of year-over earnings declines since 3Q08–3Q09. CVS, Disney and Macy’s impressed this week. Perrigo, Ruby Tuesday and Wendys were among the disappointments.
  • U.S. retail sales were flat in July, the Commerce Department reported. Although the news challenges the economic outlook, it isn’t the whole picture — consumer spending accounts for nearly 70% of GDP, but retail spending represents only about a third of consumer outlays.
  • The June job openings and labor turnover survey showed a slight rise in job openings but a stable quits rate. New openings rose to 5.6 million from an upwardly revised 5.5 million in May. Hires continued to exceed separations in June, implying an overall employment increase.
  • U.S. productivity fell at a 0.5% annualized rate in 2Q16 following a 0.6% decline in 1Q16. It was the third straight quarter of contraction and the first YoY decline since 2Q13, raising concerns that if productivity stays weak, companies may have to trim hiring to protect profit margins.
  • Unemployment claims totaled 266,000 for the week ended August 6, a decrease from the previous week. The report marked 75 consecutive weeks of initial claims below 300,000, the longest streak since 1970. The continuing claims rate was 1.6%, unchanged from the prior week.
  • Three-month GDP growth expanded by 0.3% in the U.K. for July, half the rate measured in June. U.K. manufacturing continued to shrink; production fell 0.3% in June after contracting 0.6% in May. Year- over-year production rose 0.9% in June versus 1.5% the prior month.

CPWM Weekly Market Monitor (2016.08.15)