U.S. stocks rose this week while foreign stocks had modest losses. Stock prices were largely driven by earnings news but also anticipation the Federal Reserve will cut short term interest rates next week. Q2 Gross domestic product showed U.S. growth slowed in the second quarter and 2018 GDP was revised lower. The European Central Bank signaled possible asset purchases and rate cuts further into the negative. The U.S. dollar strengthened against a basket of currencies and the 10-year Treasury note rose to 2.072%. Gold declined and crude oil rose slightly.
The House of Representatives passed a two-year budget deal that would raise spending caps and suspend the debt limit. Since the deal was endorsed by president Trump, it is expected the Senate will approve it next week. Also, looking forward to next week, the U.S. and China will restart trade negotiations.
In the numbers this week:
- The National Association of Realtors reported that existing home sales fell 1.7% in June and are down 2.2% from a year earlier. Especially hard hit were sales in high priced west coast markets as a decline in home prices caused buyers to wait for further declines. Sales actually rose in the Midwest and Northeast in June. The decline came despite lower mortgage costs.
- The Commerce Department reported:
- Durable goods order rose 2% in June, following declines in April and May as aircraft orders saw a sharp rebound. Also, orders for cars and car parts rose 3.1% in June.
- New home sales rose 7% in June, following declines in April and May. New home sales have risen 6% for the year through the end of June versus the same period last year.
- Gross domestic product grew at a 2.1% annual rate (adjusted for inflation) in the second quarter, down from a 3.1% annual pace in the first quarter. While the first quarter saw a jump in inventories and exports with a decline in imports, these trends reversed in the second quarter. Business investment declined in Q2 but consumer spending grew at a 4.3% annual pace. Government expenditures also grew at a 5.0% annual pace.
- The annual GDP revisions saw 2018 growth revised down from 3.0% to 2.5%. The adjustments reflected a strong upward adjustment in the personal savings rate and a new quality-adjusted calculation for cellphones.
- The Federal Reserve reported that industrial production was unchanged in June and is up 1.3% from a year earlier. Factory output rose 0.4% in June and mining output (including oil and gas) rose 0.2%. Utility production was down 3.6% in June due to milder that normal temperatures.
- The Labor Department reported first time claims for unemployment fell 10,000 to a seasonally adjusted 206,000 last week. The four week moving average of claims, designed to smooth out weekly fluctuations, fell 5,750 to 213,000.
- Factset reported that with only 16% of the S&P500 companies reporting results, the blended earnings decline was 1.9%.
- The Energy Information Administration weekly report is here: wpsrsummary. Also, the EIA reported in the prior week:
- U.S. Crude oil production fell from 12.0MM barrels per day to 11.3MM barrels per day.
- Storage of natural gas rose 36BN cubic feet and is still below the past five year average for this time of year.
- Baker Hughes reported in the past week that the number of active oil rigs fell 3 to 775 and the number of active gas rigs fell 5 to 169.
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Loren C. Rex, CFP®, AIF®, MA Erik A Smith
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
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Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.