Call 713-840-1000 / 800-960-1200

Market Insights

Market Insights: July 7, 2014

Market Insights: July 7, 2014

Economic Outlook:  Most Data Confirms Continuation of Growth

  • As we’ve discussed in the last several weeks, the housing numbers continue to show improvement. The Pending Home Sales number for the month of May posted a 6.10% increase over the previous month. This is the biggest monthly gain in more than four years.  [National Association of Realtors]
  • Auto Sales rose 1.20% in June and surpassed the 17 million annualized rate. This marks the highest annualized rate since 2006, before the Great Recession.
  • PMI’s Manufacturing Index reading from Markit for the month of June posted a strong 57.3. This reading was confirmed by the separate measurement from ISM at 55.3. Hard to find signs of a looming recession here.
  • The Bureau of Labor Statistics released its Employment Situation report in the holiday shortened week last week. The Unemployment rate dropped to 6.10%, and nonfarm payrolls increased 288,000, more than expectations. Average Hourly Earnings increased 0.20% over the preceding month. This rate of increase is less than the rate of increase in wages which Fed Chair Janet Yellen has indicated that she would like to see.
  • The CPI metric for the Euro-zone was updated last week, and has posted a 0.50% increase from the year-ago level. Mario Draghi commented that this leaves the CPI at what monetary authorities consider a “danger zone” of less than 1.0%. This preserves the likelihood that additional stimulus will be applied in the Euro-zone.
  • Japan’s PMI Composite Index posted at exactly 50 in the most recent reading. This puts the Japanese economy exactly at the inflection point between expansion and contraction.
  • Meanwhile the Chinese PMI Composite Index has rebounded and stands at 52.4.

Equities Outlook:  Record Close in Short Week

  • It was a short market week because of the holiday and trading was light. Nonetheless U.S. equity market closed on Thursday at record levels.

Fixed Income Markets:  A Slow News Week

  • The Ten-Year Treasury drifted higher in yield during the short week. It had closed the previous week at a yield of 2.53%, and opens the new full week trading at the 2.62% level, just about where it was two weeks ago.
  • Fed Chair Janet Yellen spoke last week to the IMF meeting in Washington. She expressed the opinion that risk-taking in the financial system is not severe at the current time and does not pose a threat to flexibility in monetary policy.

The Week Ahead

Tuesday

  • NFIB Small Business Optimism Index (NFIB)

Wednesday

  • FOMC Minutes released

Friday

  • Treasury Budget