Weekly Market Snapshot

July 21, 2017

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

It was a relatively thin week for economic data. Building permits and housing starts were stronger than expected in June. These figures can be choppy, but it appears as if the mild winter pulled forward seasonal gains from April and May into the first quarter. Unadjusted single-family permits for 2Q17 were up 7.1% from 2Q16. Homebuilder sentiment continued to edge down (still relatively high by historical standards), as builders cited concerns about rising costs (notably, lumber). The European Central Bank left short-term interest rates unchanged and did not alter its asset purchase program, but ECB President Draghi said the policymakers will consider whether to alter its future asset purchase plans in the autumn. Financial markets were hoping for a signal that policy will be tightened and took Draghi’s words as “hawkish” – resulting in a stronger euro. 

Senate efforts to repeal the Affordable Care Act failed once again. News that the Mueller investigation was expanding into Trump’s businesses caught the market’s attention. 

Next week, the economic calendar picks up, but the Fed policy meeting is not expected to be the highlight. There is no Yellen press conference this time and we won’t get revised Fed forecasts – the only thing to go on will be the wording of the policy statement, which isn’t likely to change much from the policy statement we got six weeks ago. Financial markets could react to surprises in the Consumer Confidence Index or durable goods orders, but the focus is on the 2Q17 GDP estimate. There’s always a lot of uncertainty in the advance estimate, but we’ll also get annual benchmark revisions, adding another layer of uncertainty (revisions are likely to shift growth from quarter to quarter, not necessarily higher or lower). Consumer spending growth is expected to have picked up in 2Q17 (despite the soft retail sales results for May and June). Business fixed investment should remain strong (but not as robust as in 1Q17).


Indices

  Last Last Week YTD return %
DJIA 21611.78 21553.09 9.36%
NASDAQ 6390 6274.44 18.70%
S&P 500 2473.45 2447.83 10.48%
MSCI EAFE 1937.82 1904.89 15.07%
Russell 2000 1442.35 1425.66 6.28%

Consumer Money Rates

  Last 1 year ago
Prime Rate 4.25 3.50
Fed Funds 1.16 0.40
30-year mortgage 4.03 3.65

Currencies

  Last 1 year ago
Dollars per British Pound 1.297 1.323
Dollars per Euro 1.163 1.103
Japanese Yen per Dollar 111.91 105.82
Canadian Dollars per Dollar 1.259 1.309
Mexican Peso per Dollar 17.486 18.577

Commodities

  Last 1 year ago
Crude Oil 46.92 44.75
Gold 1252.10 1339.90

Bond Rates

  Last 1 month ago
2-year treasury 1.35 1.34
10-year treasury 2.24 2.15
10-year municipal (TEY) 4.03 2.83

Treasury Yield Curve – 07/21/2017


As of close of business 07/20/2017


S&P Sector Performance (YTD) – 07/21/2017



As of close of business 07/20/2017


Economic Calendar

July 23  —  IMF World Economic Outlook (update)
July 24  —  Existing Home Sales (June)
July 25  —  CB Consumer Confidence (July)
July 26  —  New Home Sales (June)
 —  FOMC Policy Decision (no Yellen press conference)
July 27  —  Durable Goods Orders (June)
 —  Durable Goods Orders (June)
 —  Advance Economic Indicators (June)
July 28  —  Real GDP (2Q17 advance estimate + benchmark revisions)
 —  Employment Cost Index (2Q17)
 —  UM Consumer Sentiment (July)
August 1  —  ISM Manufacturing Index (July)
August 4  —  Employment Report (July)
September 20  —  FOMC Policy Decision (Yellen press conference)

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business July 20, 2017.

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