General market news
- The yield on the 10-year Treasury opened this Monday at the same level as it opened last week, around 2.18 percent; however, it did spike to as high as 2.28 percent last Wednesday. The 30-year yield opened lower at 2.76 percent after it reached as high as 2.87 percent last week. All markets are looking at the Federal Reserve (Fed) and the meetings in Jackson Hole this week, with Janet Yellen and Mario Draghi scheduled to speak on Friday.
- S. markets were down last week. The Dow Jones Industrial Average posted the largest decline of 0.77 percent. The S&P 500 Index and the Nasdaq Composite followed closely behind, with both dropping 0.58 percent. Conversely, international markets moved higher, particularly in the emerging market space. This contrast in performance was largely due to political tension in the U.S. President Trump was forced to disband two of his business councils after multiple CEOs jumped ship following his comments about the incident in Charlottesville. In addition, rumors swirled that the president’s chief economic advisor, Gary Cohn, might resign. This was followed by the exit of chief strategist Steve Bannon on Friday. Fortunately, international tensions over North Korea eased last week following reports that Kim Jung Un had cancelled his plans to attack Guam.
- Outside of political news, both the Fed and the European Central Bank discussed in their July minutes the lower pace of inflation. Retail sales saw a nice uptick last week, and the pace of inflation will continue to be a heavy focus as the central banks look to continue tightening.
- The economic news releases last week were mostly positive, with noted strength in consumer spending and home builder sentiment. As noted above, retail sales data beat expectations for growth on both the core and headline figures. On a month-over-month basis, headline retail sales gained 0.6 percent against expectations for 0.4-percent growth. This strength in retail sales is a welcome sign, as high consumer confidence had not translated into stronger consumer spending. If this growth in sales continues, it would certainly support accelerated second-half growth.
- Housing data was mixed. The National Association of Home Builders Housing Market Index rose from 64 to 68 against expectations that it would remain flat. This barometer of home builder confidence has remained in healthy expansionary territory for the year, and its bounce back to the high 60s indicates that home builder sentiment remains solid. On the other hand, both housing starts and building permits disappointed by declining more than expected. Given low levels of supply and strong home builder sentiment, these measures are expected to improve in the coming months.
|MSCI Emerging Markets||1.64%||–0.50%||25.12%||18.65%|
|Fixed Income Index||Month-to-Date||Year-to-Date||12-Month|
|U.S. Broad Market||0.48%||3.21%||0.20%|
What to look forward to
This will be relatively quiet week on the economic news front. The few major releases will relate to housing sales and durable goods orders.
July’s new and existing home sales data will be released on Wednesday and Thursday of this week. New home sales are expected to remain unchanged at 610,000, as supply remains constrained. While this may not seem like an attention-grabbing growth figure, this level actually represents the fastest pace of new home sales since recording began. Existing home sales are expected to bounce back slightly from declines in June, although supply remains constrained here as well. It currently sits at its lowest level in more than 21 years.
Durable goods orders for July will be released on Friday. The headline figure is expected to decrease by 5.8 percent following a surprise 6.4-percent increase in June. This decline can be attributed to volatile airplane sales; Boeing received 184 airplane orders in June and only 22 in July. The core figure, which excludes airplane sales, is expected to notch a healthy gain of 0.5 percent for the month. This core reading is more indicative of overall business confidence, and a positive result would be a boon for business growth.