General market news
- Treasuries have been flat since June 15. The yield on the 10-year has stayed at or around 2.15 percent. Although it moved slightly lower last week, the 30-year seems to have stabilized around 2.72 percent. Meanwhile, the 2-year has tested lower levels but seems to be sticking around 1.34 percent for now.
- The S&P 500 and Dow Jones Industrial Average edged higher last week, gaining 0.22 percent and 0.05 percent, respectively. But it was the Nasdaq Composite that performed best, jumping 1.85 percent on a rebound in technology and a continued rally in health care. Health care posted its fifth straight week of gains and was the top-performing sector, benefiting from news of a potential executive order that would reduce drug prices through less pharmaceutical industry regulation. The energy sector continued to struggle, however, as the price of oil entered bear market territory. The commodity fell to $42.53—its lowest level in 10 months—as elevated U.S. production continued to be a headwind.
- The few economic data points released last week came in mixed. On Wednesday, existing home sales increased more than expected. Given low supply and a decline in previously reported new home sales, the increase was a welcome reaffirmation that demand in the housing market remains robust. The Markit U.S. Manufacturing PMI, which measures overall business conditions, came in with a surprise decline against expectations for modest growth. This measure is still in expansionary territory, though, and it could rebound. Finally, new home sales increased more than expected in May, following a surprise decline in April. The simultaneous rebound in existing and new home sales should help calm concerns of a potential slowdown in the housing market.
| Equity Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | 0.22% | 1.21% | 9.98% | 17.81% |
| Nasdaq Composite | 1.85% | 1.13% | 17.07% | 29.21% |
| DJIA | 0.05% | 1.96% | 9.58% | 21.84% |
| MSCI EAFE | –0.17% | 0.11% | 14.51% | 15.66% |
| MSCI Emerging Markets | 0.99% | 0.93% | 18.42% | 24.23% |
| Russell 2000 | 0.58% | 3.35% | 4.87% | 22.38% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | 0.48% | 2.86% | 0.81% |
| U.S. Treasury | 0.52% | 2.56% | –1.09% |
| U.S. Mortgages | 0.04% | 1.80% | 0.61% |
| Municipal Bond | 0.17% | 4.12% | 0.16% |
Source: Morningstar Direct
What to look forward to
This week will give us a look at both business and consumer behavior. On the business side, we’ll see the Durable Goods Orders report for May on Monday. The headline index is expected to drop by 0.6 percent, following a 0.8-percent drop in April. The headline index includes transportation, which tends to be volatile, and, in fact, decreases in both aircraft and auto orders are expected to be responsible for the decline. Core orders, which exclude transportation, are expected to rebound, gaining 0.4 percent in May after a 0.5-percent decline in April. Regardless of the weakness in transportation, a rebound in the core figure would suggest improving business investment in the second quarter—a positive for the economy.
On Tuesday, we’ll learn the results of the Conference Board’s Consumer Confidence survey. It’s expected to drop to 116.0 for June, down from 117.9 in May. Although the drivers of confidence—such as labor market conditions, gas prices, and the stock market—remain positive, other measures have pulled back in recent months, so some moderation in this survey is reasonable. Even if there is a slight decline, confidence remains at levels that historically have indicated continued growth.
On Friday, we get another look at the consumer with the Personal Income and Spending reports. These will tell us whether confidence is actually leading people to go out and shop. Personal income is expected to grow by 0.3 percent in May, down from 0.4 percent in April, but still a healthy level of growth—and one that allows for faster spending. Personal spending, though, is expected to come in at just 0.1 percent in May, down from 0.4 percent in April, due to lower auto sales and gas prices. What’s interesting here is that, because inflation has dropped, this would actually represent a faster rate of growth in real spending. So, the decline is less worrisome than it might otherwise be, and spending growth remains supportive for the economy.