Ken’s market discussion with Maria
Bartiromo on the closing bell, CNBC on Friday:
http://video.cnbc.com/gallery/?play=1&video=3000189349
Will the Market ‘cool off’, the rest
of the summer?
Markets ended a slow trading week in
the red, posting the biggest weekly decline since June. Stocks were pushed down
by low volume and investor concerns about when the Federal Reserve will wind
down its stimulus program. For the week, the S&P 500 lost 1.07%, the Dow
fell 1.49%, snapping a six-week winning streak, and the Nasdaq slid 0.80%.[i]
Last week was light on economic data
and investors focused on whether or not the Fed is going to start tapering bond
purchases after the September FOMC meeting. With a number of Fed officials
going on record as supporting a September taper, it’s looking increasingly
likely that, if economic data continues to look optimistic, the Fed will pull
the trigger next month. While Fed Chairman Ben Bernanke has reassured investors
that no official date has been set, a chorus of top Fed policymakers suggested
last week that they would like to start trimming back quantitative easing next
month if economic reports turn out as expected, indicating that there may be
some dissension in the Fed ranks.[ii]
Although recent macroeconomic
reports have been largely upbeat, some economists are disappointed by the
mediocre July jobs report. The net gain of 162,000 new jobs fell well below
forecasts of 180,000 (and market rumors of gains of 200,000.) Digging deeper
into the data, some analysts suggest that the job gains came largely from the volatile
(and low-paid) part-time employment category. Other forward-looking indicators
suggest that, though the headline unemployment rate dropped to 7.4% from 7.6%,
it may tick upward in the near term.[iii] The
unemployment rate is one of the major economic indicators that the Fed uses to
guide policy, meaning a fickle labor market could throw a wrench into the Fed’s
tapering plans.
Looking ahead at this week’s ticker,
analysts and investors will be paying close attention to a raft of economic
data, including July retail sales, the Philadelphia Fed Survey, and housing
data for clues as to which way the Fed may jump next month. Two high-ranking
Fed officials are scheduled to give speeches on Tuesday and Wednesday, meaning
we may get more hints about how Fed economists feel about the economy and how
likely a September taper may be.
As we’ve mentioned in recent
commentaries, we usually do not view minor pullbacks as cause for alarm.
Healthy markets do not move up in a straight line; they move up and down. For this reason, we do our
utmost to keep focused on long-term trends rather than short-term movements. If
you have any questions about how the tapering of QE, or how recent market moves
may affect you, please feel free to reach out to us. It is our pleasure to be
of service.
ECONOMIC
CALENDAR:
Monday:
Treasury Budget
Tuesday: Retail Sales, Import and Export Prices, Business
Inventories
Wednesday: Producer Price Index, EIA Petroleum Status Report
Thursday:
Consumer Price Index, Jobless Claims,
Empire State Mfg. Survey, Treasury International Capital, Industrial Production,
Housing Market Index, Philadelphia Fed Survey
Friday: Housing Starts, Productivity and Costs, Consumer Sentiment
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
HEADLINES:
U.S. wholesale inventories fell in June. Wholesale inventories, an important measure of business
spending, unexpectedly fell in June for the second straight month, pulled down
by a drop in automobile inventories. The 0.2% drop caused economists to trim
their Q2 GDP growth estimate slightly to 2.4%.[iv]
Retailers boost July sales with promotions. U.S. retailers reported higher July sales, but relied
heavily on discounts and promotions to lure shoppers into stores. Thus far,
consumers remain frugal during the back-to-school season, the year’s
second-largest retail period.[v]
China’s industrial production beats expectations. The country’s industrial production grew in July, showing a
9.7% increase over the same period last year. Manufacturing and industrial
activity are big components of the Chinese economy, and these results could indicate
that the world’s second-largest economy is on the mend.[vi]
Detroit
bankruptcy puts the heat on local bond issuers. Michigan
bond issuers that wish to tap the muni bond market are feeling the effects of
Detroit’s debt default as
[i] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-august-5-2013.htm
[ii] http://www.reuters.com/article/2013/08/08/us-usa-fed-fisher-cnbc-idUSBRE97714920130808
[iii] http://blogs.reuters.com/macroscope/2013/08/09/why-the-mediocre-u-s-july-jobs-report-was-worse-than-it-looked/
[iv] http://www.reuters.com/article/2013/08/09/us-usa-economy-idUSBRE9770K220130809
[v] http://www.reuters.com/article/2013/08/08/us-usa-retail-july-idUSBRE9770KH20130808
