The markets rose in the first part of the week by strong earnings from several large companies. Janet Yellen’s testimony to congress said the recovery is not yet complete but she noted that there are pockets of stretched valuations in stocks of smaller firms in social media and biotechnology. On Thursday stocks fell in the morning due to a puzzling decline in June housing starts. Thursday’s selloff was accelerated by the shooting down of a Malaysian plane flying over Ukraine. On Friday more upbeat earnings caused stocks to regain most of Thursday’s decline with US stocks gaining for the week. Treasuries also rose as the US is considered a safe haven by the rest of the world. Also, China has accelerated its purchases of US Treasuries this year. Economic numbers were mixed. In my opinion, once second quarter earnings announcements end, stronger economic news will be needed for further stock gains. In particular this week:
- US Retail Sales rose modestly by 0.2% in June much less than the 0.6% forecast. Excluding autos retail sales rose 0.4%. May Retail Sales were revised upwards from 0.3% to 0.5%. Retail sales were up 4.3% from June of last year.
- US Import Prices rose only 0.1% in June, much less than the 0.4% forecast, after a 0.3% rise in May.
- US Producer Prices rose 0.7% in June. From a year ago June’s producer prices were up 2.75%.
- First time claims for unemployment fell to 302,000 in the prior week from a revised 305,000 the week before. The four week moving average also declined by 3,000 to 309,000.
- The US Commerce Department reported US Housing Starts unexpectedly fell 9.3% in June. The odd thing was the decline was solely due to a 30% decline in the South as the other regions all posted increases. May’s decline was revised lower from a 6.5% decline to a 7.3% decline. Both single family and multi-family housing starts declined. On the positive side permits for single family homes rose 2.6% in June from the prior month and were up 7.5% from the previous year.