Market Summary
The Dow, the S&P 500 and the Russell 2000 Small-Cap indexes all inched up last week, while the NASDAQ closed slightly lower, but still boasted the best YTD performance of 13.24%. Stocks traded in a narrow range while the market digested the Trump threat of increased tariffs, the outcome of the meeting with Putin, comments from the Federal Reserve, as well Q2 corporate earnings results.
In an interview with CNBC the President said he was ready to place tariffs on all Chinese goods imported to the US, which would amount to more than $500 billion. In addition, President Trump also broke with tradition and signaled his continued frustration with the Federal Reserve’s policy of raising interest rates by arguing that it has the potential to reduce his fiscal stimulus measures that are intended to push US economic expansion into its ninth year. Fed Chairman Jerome Powell testified before Congress where he shared an upbeat assessment of the U.S. economy and said the Fed plans to gradually raise interest rates “for now”. The “for now” might imply that Fed leaders realize they might not be able to raise rates as much as they would like due to conditions in the rest of the world.
This week will continue the heavy schedule of earnings releases with almost a third of the S&P 500 companies reporting their quarterly results –as well as giving guidance for the future. So far 87% of corporations already reporting earnings have exceeded Wall Street estimates, with FactSet now forecasting Q2 profits that will be up over 20% from a year earlier.
We also will get our first glimpse of the preliminary second quarter economic growth. Some estimates are calling for 2Q GDP growth of over 4% in contrast to 1Q GDP of just 2.0%. Strong economic growth and rising corporate earnings will go a long way in supporting current stock valuations.
Economic Highlights
- Employment: Jobless claims fell 8,000 to 207,000, the lowest level since December 1969.
- Industrial Output: U.S. industrial production rose 0.6% in June, putting 2Q growth at 6% versus 2.4% in 1Q. The Philadelphia Fed Manufacturing Index hinted at robust economic growth with a six point rebound to 25.7 in July.
- Leading Economic Index gained, showing broad strength and strong new orders
US Economy - The Week Ahead
Tuesday, 7/24/2018
FHFA Home Price Index – Consensus Estimate: +0.3% MoM, Prior Month: +0.1% MoM
Wednesday, 7/25/2018
Building Permits – Consensus Estimate: 1,273K (0% MoM), Prior Month: 1,273K (-2.2% MoM)
New Home Sales – Consensus Estimate: 670K (-2.8% MoM), Prior Month: 689K (6.7% MoM)
Thursday, 7/26/2018
Initial Jobless Claims – Consensus Estimate: 221,000 (6.8% WoW), Prior Week: 207,000 (-3.7% WoW)
Durable Goods Orders Month-over-Month (Preliminary) – Consensus Estimate: +0.76%, Prior Month: -0.36%
Wholesale Inventories Month-over-Month – Consensus Estimate: +0.4%, Prior Month: +0.6%
Friday, 7/27/2018
US Second Quarter GDP Year-over-Year (Preliminary) – Consensus Estimate: 2.9%, Prior Quarter: 2.8%
University of Michigan Consumer Sentiment Survey (Final) – Consensus Estimate: 96.9 (-0.2% MoM), Prior Month: 97.1 (-1.7% MoM)
