July 31st – Weekly Update

  • The Dow Jones gained some ground while the Nasdaq and S&P 500 dipped. Gold was up for the third week in a row and oil jumped. The 10-year U.S. Treasury yield closed at approximately 2.29%.
  • With 57% of S&P 500 companies having reported second quarter results, 73% have beaten both earnings and sales expectations. According to FactSet, the second quarter blended earnings growth rate estimate for the S&P 500 is 9.1%. Scientific Games Corporation, WebMD and PetMed Express impressed this week; Seagate Technology, Thermo Fisher Scientific and Tupperware were among the disappointments.
  • The Federal Reserve (Fed) announced that interest rates will be held steady, as widely anticipated. Investors seemed more interested in the Federal Open Market Committee’s (FOMC) take on inflation trends and the balance-sheet runoff that was outlined at June’s meeting. The statement was little changed from the June edition, though there was some increased acknowledgment of weaker inflation (by the removal of the word “somewhat” from a statement about price growth running below 2%).
  • Investors were also hoping for a clearer signal about when the Fed would begin its balance-sheet normalization efforts, though the statement disappointed in this regard. In place of a reference to normalization beginning “this year,” the FOMC said the program would begin “relatively soon,” but also hedged slightly by adding that the current reinvestment policy would be maintained “for the time being.”
  • Political headlines were very thick during the period. The Senate GOP’s health care reform and tax reform were center stage. The Washington Post noted that White House officials may be preparing to push
  •  A targeted, short-term tax cut in the event that more comprehensive tax-reform legislation fails.
  • Q2 GDP increased in line with expectations at a 2.6% annualized rate following the downwardly revised 1.2% growth seen in Q1 (was +1.4%). The report noted that the increase was influenced by positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports and federal government spending. The gains were partly offset by detractions from private residential fixed investment, private inventory investment and state and local government spending.

CPWM Weekly Market Monitor (2017.07.31)