August 1st – Weekly Update

  • Stocks were mostly up following a volatile week that included disappointing advance U.S. gross domestic product (GDP) data combined with mixed global economic signals. Oil prices were down after tumbling to a 21-day low midweek. Gold experienced gains after the Federal Reserve’s (Fed) announcement to hold rates. The 10-year U.S. Treasury yield closed lower for the period.
  • With 63% of S&P 500 companies having reported first quarter results, 71% have beaten earnings expectations while 57% have beaten sales expectations. According to FactSet, the second quarter blended earnings decline stands at -3.8%, compared to the July 1 forecast of -5.3%. If the index reports negative earnings growth for the quarter, it will mark the fifth consecutive quarter of decline, the first such string since 3Q08–3Q09. Sprint, Jet Blue Airways and Apple impressed this week; McDonald’s, Twitter and Ford were among the disappointments.
  • Advance 2Q16 U.S. GDP data estimated weak growth at an annualized rate of 1.2%. U.S. GDP for 1Q16 was revised down to 0.8% from 1.1%.
  • The Conference Board’s U.S. consumer confidence slipped to 97.3 in July from a downwardly revised 97.4 in June, but came in better than the 96.0 consensus. The University of Michigan consumer sentiment index also fell from 93.5 in June to 90.0 in July.
  • Weekly initial jobless claims continued their long sub-300,000 streak, coming in just above consensus at 266,000, a slight uptick from last week’s downwardly revised 252,000 level. The four-week moving average ticked down to 256,500 from the prior week’s downwardly revised 257,500.
  • New U.S. single-family home purchases rose 10.1% during the first half of 2016, compared to the same period in 2015. Sales rose 3.5% comparing June 2016 to May 2016 – the strongest monthly sales statistic since February 2008. Meanwhile, British mortgage approvals fell in June reaching their lowest level since May 2015.
  • The Fed announced that while it will presently hold interest rates, contingent on the labor market and overall strength of the economy, a September hike is not off the table. According to their statement, “… economic activity has been expanding at a moderate rate.”

CPWM Weekly Market Monitor (2016.08.01)