Commentary Weekly Market Update As of August 2, 2013 The Economy - Economic data played a familiar tune this week, with the U.K. showing strength, the U.S. having mixed reports, the eurozone stabilizing and most of Asia struggling. This trend continues to support SEI’s outlook for slow economic growth. The picture of a slow-but-steady U.S. economy was reinforced by the initial estimate of 1.7% real second-quarter economic growth from the Bureau of Economic Analysis. First-quarter growth was revised down to a final estimate of 1.1%. Labor data was mixed. Initial claims dropped sharply, which may have been due to seasonal distortions. The government’s nonfarm payrolls report was weaker than expected, with jobs rising by 162,000 versus an expected 175,000, and downward revisions to previous months. On a positive note, ADP said that private-sector payrolls increased by 200,000 in July, the largest monthly tally of 2013, with upward revisions to June. After reaching a post-recession high in June, the Conference Board’s index of consumer sentiment fell slightly in July. Expectations of future conditions tumbled, but jobs were a bit easier to find and household spending plans looked healthy. Housing showed softness after a torrid run, but remains solid. Pending home sales fell slightly in June after a strong showing in May, with rising home prices and mortgage rates blamed for the decline. In May, the S&P/Case Shiller home price index continued to advance from its late-2011 lows, but at a slower pace. CoreLogic reported that foreclosure inventories have declined substantially and the proportion of seriously delinquent mortgages fell to its lowest level since 2008. The Census Bureau reported that construction activity dropped by more than expected in June. However, year-over-year trends remain positive, and May was revised upward. The Market U.S. Manufacturing Purchasing Managers Index (PMI) rose to a four-month high in July. New orders, including exports, improved notably. The ISM Manufacturing Index for July showed similar strength, rising to 55.4 from 50.9 in June, more than two points ahead of economists’ median forecast. The U.S. Department of Commerce reported that factory orders rose 1.5% in June (yet declined when excluding transportation equipment). This was below expectations of 2.3%, although May was revised up from 2.1% to 3.0%. Federal Reserve (Fed) manufacturing reports for the upper Midwest and Texas were positive, but improvements were slower than expected. It was another good week for the U.K. economy. In July, consumer sentiment rose to its highest level in over three years, and manufacturing activity increased for the third straight month to its highest level in over two years. Inflation and unemployment were stable in the eurozone in July, which may provide room for an eventual easing of economic policies. Economic Calendar - 8/5: ISM Non-Manufacturing 8/6: International Trade 8/7: MBA Purchase Applications 8/8: Initial Jobless Claims 8/9: Wholesale Trade Stocks Global equity markets rose for the week. In the U.S., growth stocks beat value stocks and large-company stocks outperformed small-company stocks. All sectors were positive. Industrials and information technology outperformed, while energy and telecommunications underperformed. Bonds Global bond markets fell for the week. Corporate bonds outperformed, followed by high-yield bonds. Global government bonds lagged. Treasurys experienced volatility toward the end of the week, as conflicting labor-market reports from ADP and the Department of Labor caused some uncertainty over the direction of Fed policy.
Posted on: Tue, 06 Aug 2013 15:35:17 +0000