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Weekly Update

Market Summary

U.S. stocks notched another strong performance this past week as Federal Reserve Chairman Jerome Powell’s congressional testimony and the minutes from June’s Federal Open Market Committee (FOMC) meeting signaled a high likelihood of an interest rate cut at this month’s FOMC meeting. The news of a shift to more accommodative monetary policy has outweighed investor concerns of the slowing rate of global economic growth, trade tensions, and falling inflation, which have been the catalysts for such a move. For the week, the major stock indices continued to notch further record highs, with the Dow climbing 1.5%, the Nasdaq Composite up 1.0%, and the S&P 500 surpassing the 3,000 level for the first time ever with a 0.8% gain.

In China, the impact of the trade conflict and global slowdown has been particularly acute as China’s economic growth fell to its slowest pace in 27 years with a 6.2% growth rate for the second quarter of 2019, down from 6.4% in the first quarter. Analysts are expecting the Chinese government to lower interest rates and increase infrastructure development spending in a continued effort to stimulate the economy in the face of growing headwinds.

Investors will be paying close attention to retail sales in the week ahead as a gauge for the health of U.S. consumption. Additionally, second quarter corporate earnings will come into focus this week with a number of large banks and financial institutions on the docket in the next few days to kick things off. According to FactSet, it is set to be a more difficult earnings season with the S&P 500 constituents expected to post a -3.0% decline in earnings over the high bar set last year, which would be the largest decline in three years.

Economic Highlights

Inflation: June’s U.S. core CPI reading came in above expectations with a 2.1% increase year-over-year, compared to the consensus forecast and prior month reading of 2.0%. U.S. 10-year Treasury yields rose on the news, closing the week at 2.11%, up from 2.04% the week prior.

Oil: Hurricane Barry made landfall Saturday and was downgraded to a tropical storm. In the Gulf of Mexico, Barry has reduced offshore natural gas output by 56% and offshore oil production by nearly 70%, according to Reuters. Oil prices rose last week to reflect the tightening supply, with WTI crude oil prices climbing 4.7% for the week. The decrease in production could continue as the storm moves through the Louisiana production and refining fields.

US Economy – The Week Ahead

Tuesday, 7/16/2019

  • Retail Sales (Month-over-Month) – Consensus Estimate: 0.2%, Prior Month: 0.5%
  • Industrial Production (Month-over-Month) – Consensus Estimate: 0.1%, Prior Month: 0.4%

Wednesday, 7/17/2019

  • Housing Starts – Consensus Estimate: 1,265K (-0.3% MoM), Prior Month: 1,269K (-0.9% MoM)
  • Building Permits – Consensus Estimate: 1,300K (0.1% MoM), Prior Month: 1,299K (0.7% MoM)

Thursday, 7/18/2019

  • Initial Jobless Claims – Consensus Estimate: 215,000 (2.9% WoW), Prior Week: 209,000 (-5.9% WoW)
  • Leading Economic Indicator Index (Month-over-Month) – Consensus Estimate: 0.1%, Prior Month: 0.0%

Friday, 7/19/2019

  • University of Michigan Consumer Sentiment Survey (Preliminary) – Consensus Estimate: 98.0 (-0.2% MoM), Prior Month: 98.2 (-1.8% MoM)

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