July 18th – Weekly Update

  • As stocks posted a week of strong gains, the Dow Jones Industrial Average and the S&P 500 index hit new highs. U.S. inflation rose 0.2% in June, marking the fourth straight month of increases in consumer prices. The 10-year U.S. Treasury yield continued to trace a low path. Gold prices were at a two week low following the week’s equities rally. Oil experienced a modest gain after rallying with 4% gains early in the week.
  • With 7% of S&P 500 companies having reported first quarter results, 66% have beaten earnings expectations while 51% have beaten sales expectations. According to FactSet, the second quarter blended earnings decline stands at -5.5%, down from the July 1 forecast of -5.3%. If the index reports negative earnings growth for the quarter, it will mark fifth consecutive quarter of decline, the first such string since 3Q08–3Q09. Citigroup, Sagent Pharmaceuticals and Alcoa impressed this week; Twitter, Netflix and Valeant Pharmaceuticals were among the disappointments.
  • Retail sales slightly progressed in both the United States and the U.K., with the British Retail Consortium citing June growth of 0.2% compared to a year ago and U.S. retail sales advancing 0.1% since last month to 0.6%.
  • On the last business day of May, U.S. job openings decreased to 5.5 million, with hires and separations both little changed at 5.0 million. The quit rate was 2.0% and the layoffs and discharges rate stood at 1.2%.
  • The University of Michigan’s U.S. consumer sentiment index registered 89.5 in July 2016, down from 93.5 in June. Analysts had predicted 93.5. China’s GDP expanded 1.8% in 2Q16, the country’s strongest growth since 3Q15.
  • Twelve-month CPI inflation for the U.K. was a meager 0.3% in May, far below the 2% target. Euro zone inflation for June was flat, matching the previous month’s CPI reading as well as the forecasted number of 0.1%.
  • The Bank of England voted to maintain its bank rate at 0.5% as the U.K. continues to manage financial market ripples caused by the nation’s decision to leave the European Union. It is predicted that fiscal policy will be loosened at the upcoming August meeting.

CPWM Weekly Market Monitor (2016.07.18)