The Markets (as of market close August 3, 2018)
Tech and mid-cap stocks performed best last week following strong second-quarter corporate earnings reports. Led by the Nasdaq, each of the major benchmark indexes posted gains last week, except for the Global Dow. The S&P 500 enjoyed solid returns and is over 6.0% ahead of its 2017 year-end value. The Dow, which tracks 30 large-cap stocks, ticked up slightly. The small caps of the Russell 2000 bumped higher and are almost 9.0% above last year’s close.
LAST WEEK’S ECONOMIC HEADLINES
- The Federal Open Market Committee decided to maintain the federal funds rate at its current 1.75%-2.00% range. They noted that the labor market and economic activity have been strong and inflation has remained near their target of 2.0%. However, the FOMC expects further gradual increases in the target range for the federal funds rate, presuming continued economic expansion and rising inflation.
- The labor market saw 157,000 new jobs added in July, while the unemployment rate edged down 0.1 percentage point to 3.9%. The number of unemployed persons declined by 284,000 to 6.3 million in July. Over the year, average hourly earnings have increased by $0.71, or 2.7%.
- Consumer income surged in June, according to the latest report from the Bureau of Economic Analysis. Consumer spending, as measured by personal consumption expenditures, also grew. On the other hand, prices for consumer goods and services edged up slightly. Over the last 12 months, prices have increased 2.2% (1.9% increase for core prices). Personal savings, as a percentage of disposable personal income, increased 2.6% for the month and 6.8% over the last 12 months.
- The goods and services international trade deficit was $46.3 billion in June, up slightly from May. Year-to-date, the goods and services deficit increased $19.6 billion, or 7.2%, from the same period in 2017.
- According to IHS Markit®, the purchasing managers’ index fell to a five-month low in July. While respondents were generally positive in their evaluation of the manufacturing sector, new orders exceeded output. Orders were largely driven by domestic demand, as exports were generally flat.
- The Institute for Supply Management® Report On Business® also had a drop in the July purchasing managers index. New orders, production, and prices each fell compared to June, while employment and inventories gained ground.
- The sales and services (non-manufacturing) sector saw business activity scale back in July. New orders also slowed during the month. On the other hand, employment and prices increased by margins over their June totals.
EYE ON THE WEEK AHEAD
With interest rates remaining unchanged for now, this week focuses on the latest information on consumer prices. The Producer Price Index, which measures the change in prices received by sellers of goods and services, has risen 3.4% over the last 12 months ended in June. July’s Consumer Price Index, also out this week, is up 2.9% over the past year. Both indexes are expected to show moderate price increases in July.