Market Week: July 15, 2013

The Markets

Little news is apparently great news for stocks–that seems to be the takeaway from the week ended July 12. A week that was relatively light on economic data brought insightful minutes from the Federal Open Market Committee’s (FOMC’s) June meeting, encouraging follow-up comments from Fed Chairman Ben Bernanke, and a few pleasant quarterly earnings reports, all of which helped drive the Dow Jones Industrial Average, the S&P 500, and the Russell 2000 to new records.

Bond investors seemed to get a bit of relief last week as well; yields dipped by 14 basis points from the previous week’s close.

Market/Index 2012 Close Prior Week As of 7/12 Week Change YTD Change
DJIA 13104.14 15135.84 15464.30 2.17% 18.01%
Nasdaq 3019.51 3479.38 3600.08 3.47% 19.23%
S&P 500 1426.19 1631.89 1680.19 2.96% 17.81%
Russell 2000 849.35 1005.39 1036.52 3.10% 22.04%
Global Dow 1995.96 2125.38 2201.99 3.60% 10.32%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.78% 2.73% 2.59% -14 bps 81 bps

Equities data reflect price changes, not total return.

Last Week’s Headlines

  • The minutes released Wednesday from the FOMC’s June meeting clarified the committee’s thinking on its plan to taper bond buying in 2013. Comments indicated the committee felt further strengthening in the labor market was necessary before scaling back its economic support.
  • Wednesday night, in comments made during a National Bureau of Economic Research conference, Ben Bernanke said that stimulus measures would remain in place for the “foreseeable future.” This comment came as welcome relief to investors, and stocks surged on Thursday.
  • Wholesale inflation was up 0.8% in June, according to the Department of Labor, the largest increase since September 2012. The increase was largely due to a more than 7% spike in gas prices.
  • Oil futures marked the third straight week of increases, settling at $105.95 per barrel. This, combined with refinery problems that are causing worries about gasoline supplies, led analysts to forecast further increases in gas prices during the heavy summer travel period.
  • The International Monetary Fund released a more subdued outlook for the remainder of 2013 than it originally forecasted in April. The current 3.1% growth forecast is the same as in 2012, and is a 0.2% drop from the April outlook. The IMF attributes its revision to slower growth in emerging markets and continued recession in the euro region.
  • Fannie Mae released results from its monthly housing survey, finding that Americans expect both mortgage rates and home prices to increase. The agency said it anticipates these expectations will lead to an increase in home sales, as consumers rush to make purchases ahead of the expected increases. As if on cue, Freddie Mac reported that the rate for a 30-year fixed mortgage averaged 4.51% for the week ended July 11, the highest rate since July 2011.
  • The American Banking Association reported that consumer delinquencies declined in 11 of 13 categories in the first quarter of 2013, pointing to an American populace that seems to be having more success at managing its debt. The reduction in bank card delinquencies was especially impressive, falling to its lowest level since June 1990.

Eye on the Week Ahead

This week will bring a lot more information with the potential to influence market movements. Data will provide insight into business, consumer, and manufacturing behavior. We’ll also get a glimpse into whether expectations for higher mortgage rates may be impacting the homebuilding sector.

Key dates and data releases: retail sales, business inventories, Empire State manufacturing survey (7/15); consumer inflation, industrial production, international capital flows (7/16); housing starts, Fed “beige book” report (7/17); Philadelphia Fed manufacturing survey (7/18); options expiration (7/19).

Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.