The stock market finished the week higher as a bounty of positive earnings reports and economic data drove major stock indices higher. Interest rates were virtually unchanged from the week prior with the 10-year treasury yield dropping 1 basis point to 2.95%. The spread between the 10-year treasury yield and the 2-year treasury yield widened by 3 basis points to 0.32%, but still remains alarmingly narrow. Commodity prices also saw little movement with the price of gold dropping 0.07% to $1,221.90 an ounce and the price of crude oil dropping 0.48% to $68.68 a barrel. The U.S. dollar index rose to 95.21 from 94.67 the week prior as an increase in payrolls increased demand for the U.S. dollar.
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THIS WEEK’S HIGHLIGHTS
- U.S. personal income increased by 0.4% in June, in line with expectations. U.S. consumer spending also increased by 0.4% as households spent more on restaurants and accommodations.
- Personal Consumption Expenditures (PCE), a measure of inflation, rose by a moderate 0.1% in June for a year-over-year change of 2.2%. Core PCE, which excludes the volatile food and energy components, also rose by 0.1% in June for a year-over-year change of 1.9%. Both overall and core PCE are near the Fed’s target annual rate of 2.0%.
- The ISM manufacturing index came off an unsustainable high of 60.2 in June and dropped to 58.1 in July. An improvement in the number of deliveries attributed to most of the index’s decline after the number of delays in deliveries reached all-time highs in June.
- The Federal Open Market Committee unanimously voted to leave short-term rates unchanged after they gave an upbeat assessment of the economy. The Fed also reiterated its plan to gradually increase the Federal Funds Rate with a likely rate hike at their next meeting in September.
- Initial unemployment claims rose by a marginal 1,000 for the week ending July 28th for a total of 218,000. However, the less volatile 4-week average of initial unemployment claims fell 3,500 to 214,500. Continuing unemployment claims fell by 23,000 to 1.72 million, bringing its 4-week average down by 4,000 to 1.74 million.
- Nonfarm payrolls increased by 157,000 in July, coming in at the lower end of expectations and dragging the unemployment rate down a tenth of a percent to 3.9%. The average hourly earnings of U.S. workers increased by 0.3% in July, resulting in a year-over-year change of 2.7%.
- The U.S. trade deficit grew deeper than expected in June, climbing 7.0% to $46.3 billion. The increase was largely driven by a 0.6% rise in imports, settling at $260.1 billion. Furthermore, exports dropped by 0.7% to $213.8 billion.
QUOTE OF THE WEEK
“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.”
– Will Smith
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