The Markets (as of market close July 22, 2016)

The S&P 500 reached a record high last Friday while other major indexes posted marginal gains over the prior week. Equities have demonstrated a positive trend over the past several weeks. The NASDAQ eclipsed its previous high only to slip a bit by week’s end. While the indexes continue to forge ahead, overall trading has been light. Across the “pond” the UK’s economy has likely contracted in July, according to IHS Markit’s Purchasing Managers’ Index, which showed businesses responding to the uncertainty of Brexit by cutting output and payrolls.

Crude oil (WTI) closed at $44.21 a barrel last week, down from $46.28 per barrel the previous week. We continue to monitor our BWFA energy stock positions as there has been some volatility in this sector as these commodity prices are fluctuating in recent months.

Last Week’s Headlines

  • June was a good month for new home construction as the number of building permits, housing starts, and new home completions each eclipsed their respective May totals.
  • Sales of existing homes also improved in June, according to the National Association of Realtors®.  According to the NAR, sustained job growth and lower mortgage rates are factors driving home sales.
  • Builders remained cautiously optimistic about the newly built, single-family home market in July, according to the latest survey from the National Association of Home Builders. The Housing Market Index, based on respondents’ feedback, fell 1 point to 59 from June’s index of 60. An index reading above 50 indicates generally favorable expectations.
  • According to the Markit Flash U.S. Manufacturing PMI™, the Purchasing Managers’ Index™ was 52.9 in July, up from 51.3 in June. This reading signals solid improvement in overall business conditions, with the latest reading the strongest since October 2015. Manufacturing output, new orders, and employment continue to rise.

Eye on the Week Ahead

This week is an important one for economic news. The FOMC meets and may consider raising interest rates based on the surging stock market, slowly advancing inflation, and the rebounding employment situation. Also, the latest figures on the second-quarter gross domestic product are released at the end of the week.  As always we will base our BWFA research on long term, fundamental factors specific to the individual securities we follow and not overreact to short term news items.