During a slow summer week when US stock indexes declined, there was actually evidence of a few positive trends that may have gone unnoticed and could portend economic, though not necessarily stock market, improvement in the week ahead. The July ISM non-manufacturing index, along with its sibling, the manufacturing index released the week prior, show that economic growth is likely to accelerate in the third quarter from the anemic 1.7 percent annual rate seen in the second quarter. This week, regional manufacturing reports may confirm that the spring slowdown has reversed course.
There may also be better news on that first GDP reading. June’s international trade deficit narrowed to a near four-year low in June, which is faster than the Bureau of Economic Advisors assumed for its initial estimate of second-quarter GDP. The trade data indicate that growth could be revised from 1.7 percent to over 2 percent, when the next estimate is released later this month.
Two reports last week underscored that layoffs are tapering off: (1) The Labor Department said there were 2.99 job seekers for every open job in June, the first time the ratio has dropped below three since October 2008 and (2) The four-week-moving average of weekly jobless claims fell to the lowest level since November 2007.
The next step in the recovery would be a broad-based uptick in hiring, which has yet to materialize with breadth and consistency. Until job creation picks up and wages increase more substantially, chances are that retail sales and confidence, both of which will be released this week, will show good, not great progress. Earnings this week from many of the nation’s largest retailers may also provide more clues about how the second half of the year is shaping up and whether or not the back to school season is really shaping up to be as bad as everyone fears.
MARKETS: With US stocks up 18-20 percent this year and scant data set to be released prior to Labor Day, expect a few pokey weeks of trading ahead. Not that we should complain, because as Shakespeare wrote, “summer's lease hath all too short a date” (Sonnet 18).
- DJIA: 15,425, down 1.5% on week, up 17.7% on year (snaps 6 weeks of gains)
- S&P 500: 1691, down 1% on week, up 18.6% on year
- NASDAQ: 3660, down 0.8% on week, up 21.2% on year
- 10-Year Treasury yield: 2.58% (from 2.60% a week ago)
- Sep Crude Oil: $ 105.97, down 0.9% on week
- Dec Gold: $ 1312.20, up 0.2% on week
- AAA Nat'l average price for gallon of regular Gas: $3.56
THE WEEK AHEAD:
2:00 Treasury Budget
8:30 Retail Sales
8:30 Import and Export Prices
10:00 Business Inventories
Cisco Systems, Macy’s
Wal-Mart, Kohl's, Nordstrom
8:30 Weekly Jobless Claims
8:30 Empire State Mfg Survey
8:30 Philadelphia Fed Survey
9:15 Industrial Production
10:00 NAHB Home Builder Confidence
8:30 Housing Starts
8:30 Productivity and Costs
9:55 Consumer Sentiment