August 7th – Weekly Update

  • The Nasdaq finished the week lower as the S&P 500 and Dow Jones posted gains during a period populated with mixed economic data. Gold and oil lost ground and the 10-year U.S. Treasury yield closed at approximately 2.26%.
  • With 84% of S&P 500 companies having reported second quarter results, 72% have beaten earnings expectations and 70% have beaten sales estimates. According to FactSet, the second quarter blended earnings growth rate estimate for the S&P 500 is 10.1%. Yelp, Weight Watchers and GoPro impressed this week; Viacom, Blue Apron and 3D Systems were among the disappointments.
  • Nonfarm payrolls increased 209K in July following an upwardly revised 231K gain in June. This was ahead of the 180K consensus and six-month average. As expected, the unemployment rate ticked down to a 16-year low of 4.3%. The labor force participation rate increased to 62.9%.
  • Average hourly earnings rose 0.3% from June to July following a 0.2% increase in June, in line with expectations. In addition, the year-over-year rate of increase was unchanged at 2.5%, better than expectations for a slight downtick to 2.4%.
  • Monthly auto sales extended their recent streak of weakness. According to WardsAuto, July sales are tracking at a 16.7M seasonally adjusted annual rate (SAAR), compared to consensus for a 17M pace and to 17.9M in July 2016.
  • July’s ISM manufacturing reading came in at 56.3, down from June’s 57.8 level and just below consensus for 56.4. 15 of 18 industries reported growth. New orders were weaker at 60.4 vs. June’s 63.5 reading. June personal income was flat month-tomonth against expectations for a 0.4% rise and May’s 0.3% gain. Personal spending was also weaker than expected, up 0.1% month-to-month (compared to May’s 0.2% rise, which was also the consensus).
  • The core personal consumption expenditures (PCE) price index rose 0.1% month-to-month and 1.5% year-over-year, in line with May’s pace.
  • June construction spending was down 1.3% month-to-month, falling short of May’s 0.3% gain and below consensus for a 0.5% rise. The release reported that private construction is little changed but public construction dropped 5.4% month- over-month..

CPWM Weekly Market Monitor (2017.08.07)