Weekly Economic Update 8/22/2016

IS A 2016 INTEREST RATE HIKE STILL POSSIBLE?

According to the minutes from the Federal Reserve’s July monetary policy meeting, some Federal Open Market Committee members felt “that economic conditions would soon warrant taking another step in removing policy accommodation.” Others favored waiting longer to adjust rates, contending that the strong hiring seen in recent months would presently moderate. Fed officials broadly agreed that more economic data would be needed before any action.1    

NO CPI ADVANCE IN JULY

The federal government’s Consumer Price Index went nowhere last month, leaving yearly inflation at a mere 0.8%. The core CPI advanced another 0.1%, which put the 12-month gain in core consumer prices at 2.2%. In the year ending in June, annual headline inflation was at 1.0%; core inflation, at 2.3%.2

HOUSING STARTS RISE 2.1%

This gain comes on the heels of the 5.1% advance for June (first recorded by the Census Bureau as a 4.8% gain). July’s improvement sent the seasonally adjusted annual rate of groundbreaking to a 5-month high. The pace of building permits ticked down 0.1% last month.3

CALM TIMES ON WALL STREET

As the trading week wrapped up, the S&P 500 settled almost precisely where it had seven days earlier. For the week, the index lost 0.01% on its way to a Friday close of 2,183.87. The Dow gave back just 0.13% on the week, settling at 18,552.57 Friday. A 0.10% weekly advance left the Nasdaq at 5,238.38 at Friday’s closing bell.4

THIS WEEK: Nothing major is slated for Monday. Tuesday, Wall Street considers July new home sales figures and earnings from Best Buy, Intuit, J.M. Smucker, Kirkland’s, La-Z-Boy, Regis Corp., and Toll Brothers. Wednesday, July existing home sales numbers arrive plus earnings from Express, Guess?, HP, and Williams-Sonoma. Reports on initial jobless claims and July durable goods orders complement earnings announcements from Autodesk, Burlington Stores, Dollar General, Dollar Tree, GameStop, Medtronic, Michaels Companies, and Tiffany & Co. on Thursday. Federal Reserve chair Janet Yellen delivers a speech on the central bank’s monetary policy toolkit Friday morning in Wyoming; away from Jackson Hole, the University of Michigan’s final August consumer sentiment index and the second estimate of Q2 GDP will both arrive Friday, plus earnings from Big Lots.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +6.47 +6.94 +14.30 +6.30
NASDAQ +4.61 +4.37 +24.74 +14.21
S&P 500 +6.85 +5.01 +18.87 +6.77
REAL YIELD 8/19 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.10% 0.55% 0.02% 2.26%

Sources: wsj.com, bigcharts.com, treasury.gov – 8/19/164,5,6,7

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

WEEKLY QUOTE

“Because we don’t think about future generations, they will never forget us.”    

– Henrik Tikkanen

WEEKLY TIP

If you have recently divorced, be sure to review your will, your legal documents, and the beneficiary forms for your retirement accounts and insurance policies. All of them may need to be revised.      

WEEKLY RIDDLE

It floats gently when it is born, lies still when it is alive, and runs when it is dead. What is it?

Last week’s riddle:

Three women leave work with only one umbrella to share between them. They all try to fit under the one umbrella as they walk to a cafe. When they reach the cafe, none of them are the least bit wet. Why? 

Last week’s answer:

It never rained as they were walking.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 – cnbc.com/2016/08/17/fed-minutes-fomc-signals-door-still-open-for-2016-rate-hike.html [8/17/16]

2 – investing.com/economic-calendar/ [8/19/16]

3 – tradingeconomics.com/united-states/housing-starts [8/19/16]

4 – markets.wsj.com/us [8/19/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=8%2F19%2F15&x=0&y=0 [8/19/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=8%2F19%2F15&x=0&y=0 [8/19/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=8%2F19%2F15&x=0&y=0 [8/19/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=8%2F19%2F11&x=0&y=0 [8/19/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=8%2F19%2F11&x=0&y=0 [8/19/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=8%2F19%2F11&x=0&y=0 [8/19/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=8%2F18%2F06&x=0&y=0 [8/19/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=8%2F18%2F06&x=0&y=0 [8/19/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=8%2F18%2F06&x=0&y=0 [8/19/16]

6 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [8/19/16]

7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [8/19/16]

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