Market Week: July 25, 2016

July 25th, 2016

The Markets (as of market close July 22, 2016)

The S&P 500 reached a record high last Friday as each of the indexes listed here posted marginal gains over the prior week. Equities have demonstrated a positive trend over the past several weeks. The Nasdaq eclipsed its previous high only to slip a bit by week’s end. While the indexes continue to forge ahead, overall trading has been light. Across the “pond” the UK’s economy has likely contracted in July, according to IHS Markit’s Purchasing Managers’ Index, which showed businesses responding to the uncertainty of Brexit by cutting output and payrolls.

Crude oil (WTI) closed at $44.21 a barrel last week, down from $46.28 per barrel the previous week. The price of gold (COMEX) fell to $1,330.30 by late Friday afternoon, dropping from the prior week’s price of $1,337.70. The national average retail regular gasoline price decreased for the fifth week in a row to $2.230 per gallon on July 18, $0.023 under the prior week’s price and $0.572 below a year ago.

Market/Index

2015 Close

Prior Week

As of 7/22

Weekly Change

YTD Change

DJIA

17425.03

18516.55

18570.85

0.29%

6.58%

Nasdaq

5007.41

5029.59

5100.16

1.40%

1.85%

S&P 500

2043.94

2161.74

2175.03

0.61%

6.41%

Russell 2000

1135.89

1205.31

1212.89

0.63%

6.78%

Global Dow

2336.45

2395.14

2396.80

0.07%

2.58%

Fed. Funds rate target

0.25%-0.50%

0.25%-0.50%

0.25%-0.50%

0 bps

0 bps

10-year Treasuries

2.26%

1.54%

1.56%

2 bps

-70 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

· June was a good month for new home construction as the number of building permits, housing starts, and new home completions each eclipsed their respective May totals. Building permits for housing units and single family homes were up 1.5% and 1.0%, respectively. Housing starts, marked by the beginning of construction, increased by 4.8% for all housing units and 4.4% for single family housing. Housing completions were 12.3% ahead of May (single-family completions gained only 3.7%). Increasing demand and low inventory have promoted home building, which may be a sign of economic growth.

· Sales of existing homes also improved in June, according to the National Association of Realtors®. Closings for existing homes (including single family homes, townhomes, condominiums, and co-ops) climbed 1.1% to an annual rate of 5.57 million from a downwardly revised 5.51 million in May. Over the last 12 months, existing home sales are up 3.0%–the highest level since 2007. According to the NAR, sustained job growth and lower mortgage rates are factors driving home sales. The median existing home price for all housing types in June was $247,700–up 4.8% from last June and 3.7% ahead of May’s median price. Available inventory remains an issue for homebuyers as it dipped 0.9% to 2.12 million, which is 5.8% lower than a year ago.

· Builders remained cautiously optimistic about the newly built, single-family home market in July, according to the latest survey from the National Association of Home Builders. The Housing Market Index, based on respondents’ feedback, fell 1 point to 59 from June’s index of 60. An index reading above 50 indicates generally favorable expectations.

· According to the Markit Flash U.S. Manufacturing PMI™, the Purchasing Managers’ Index™ was 52.9 in July, up from 51.3 in June. This reading signals solid improvement in overall business conditions, with the latest reading the strongest since October 2015. Manufacturing output, new orders, and employment continue to rise.

· In the week ended July 16, the advance figure for seasonally adjusted initial unemployment insurance claims was 253,000, a decrease of 1,000 from the prior week’s level. The advance seasonally adjusted insured unemployment rate dropped to 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended July 9 was 2,128,000, a decrease of 25,000 from the previous week’s revised level.

Eye on the Week Ahead

This week is an important one for economic news. The FOMC meets and may consider raising interest rates based on the surging stock market, slowly advancing inflation, and the rebounding employment situation. Also, the latest figures on the second-quarter gross domestic product are released at the end of the week.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

Market News

July 19th, 2016

The Markets

Stocks continued to surge for the third week in a row as each of the indexes listed here posted significant gains by last week’s end. The Dow gained almost 370 points and over 2.0%, and is substantially ahead of its 2015 closing value. The S&P 500 also pushed nearly 6.0% ahead of last year’s closing value. And the Nasdaq, which had yet to reach its year-end value, finally passed that mark after gaining almost 1.5%. Clearly moving past Brexit panic, the Global Dow gained over 3.0% on the week and is 2.5% past its 2015 closing value. As prices dropped, the 10-year Treasury yield rose nearly 20 basis points on the week.

Crude oil (WTI) closed at $46.28 a barrel last week, up from $45.21 per barrel the previous week. The price of gold (COMEX) fell to $1,337.70 by late Friday afternoon, down from the prior week’s price of $1,367.40. The national average retail regular gasoline price decreased for the fourth consecutive week to $2.253 per gallon on July 11, $0.038 under the prior week’s price and $0.581 below a year ago.

Market/Index

2015 Close

Prior Week

As of 7/15

Weekly Change

YTD Change

DJIA

17425.03

18146.74

18516.55

2.04%

6.26%

Nasdaq

5007.41

4956.76

5029.59

1.47%

0.44%

S&P 500

2043.94

2129.90

2161.74

1.49%

5.76%

Russell 2000

1135.89

1177.36

1205.31

2.37%

6.11%

Global Dow

2336.45

2318.79

2395.14

3.29%

2.51%

Fed. Funds rate target

0.25%-0.50%

0.25%-0.50%

0.25%-0.50%

0 bps

0 bps

10-year Treasuries

2.26%

1.36%

1.54%

18 bps

-72 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be
used to benchmark performance of specific investments.

Last Week’s Headlines

· Businesses are paying more for goods and services as the Producer Price Index increased 0.5% in June, the largest increase in a year, according to the Labor Department. Higher energy costs pushed the increase. Since businesses usually pass on increases in the cost of goods and services, it’s likely consumer prices will increase as well, driving inflation upward.

· In fact, consumer prices did increase in June–just not at quite the same rate as producer prices. The Consumer Price Index rose 0.2%, following the same increase in May and a 0.4% gain in April. Over the last 12 months, the CPI has increased 1.0%. Excluding the volatile food and energy components, consumer prices still increased 0.2% in June and 2.3% from a year earlier.

· Consumers continue to spend as retail sales increased in June, jumping 0.6% from the previous month and 2.7% ahead of last June. This follows a 0.2% (downwardly revised) increase in May. Excluding autos and gas, household spending climbed 0.7% from May. Output excluding autos remained the same as the prior month. This report, coupled with increases in consumer and producer prices, provides optimism for the economy over the summer months.

· The manufacturing sector experienced a noticeable uptick in June, as industrial production increased 0.6% after falling 0.3% in May. Manufacturing output rose 0.4%, largely due to an increase in motor vehicle assemblies. June’s gain is the largest monthly increase since November 2014.

· The number of job openings decreased by 345,000 to 5.5 million on the last business day of May, according to the Job Openings and Labor Turnover Survey (JOLTS) report from the Bureau of Labor Statistics. April’s rate was 5.8 million. May’s job openings rate is the lowest of the year. The quits rate was unchanged at 2.0% as workers continue to remain at their present jobs. It’s important to remember that June’s employment situation report showed significant improvement on the labor front.

· U.S. import prices rose 0.2% in June from May, largely due to a spike in petroleum prices. Exports also increased in June, rising 0.8% following increases of 1.2% in May and 0.4% in April. The 2.4% rise in export prices for the second quarter of 2016 was the largest three-month advance in export prices since the index rose 2.7% between February and May 2011.

· The Treasury Department reported a $6.3 billion budgetary surplus in June, following May’s $52.5 billion deficit. However, over the first nine months of the fiscal year, the deficit is up almost 27%, at $400.9 billion, over the same period last year ($316.4 billion).

· Largely influenced by the immediate negative impact of the Brexit vote, the Index of Consumer Sentiment fell from 93.5 in June to 89.5 in July.

· In the week ended July 9, the advance figure for seasonally adjusted initial unemployment insurance claims remained level at 254,000, unchanged from the prior week’s level. The advance seasonally adjusted insured unemployment rate remained at 1.6%. The advance number for seasonally adjusted insured unemployment during the week ended July 2 was 2,149,000, an increase of 32,000 from the previous week’s revised level.

Eye on the Week Ahead

This week focuses on the housing sector as June’s reports on housing starts and existing homes sales are released. New home building slipped a bit in May, while existing home sales picked up. Overall, the housing market has been fairly strong with prices rising and inventory having a hard time keeping up with demand.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

Market News

July 16th, 2016

The Markets

Equities continue to put the upheaval caused by Brexit in the rearview mirror as several of the indexes listed here are above their 2015 closing values. Of those indexes, only the Nasdaq and Global Dow remain below their end-of-year values. The S&P 500 exceeded its record high of 2130.82 during trading last Friday, finally closing at 2129.90. June’s favorable employment report likely helped fuel the end-of-week surge. The 10-year Treasury yield settled at a record low of 1.36%. After a turbulent start to 2016, the stock indexes listed here have gathered momentum heading to the middle of the summer.

Crude oil (WTI) closed at $45.21 a barrel last week, down from $49.28 per barrel the previous week. The price of gold (COMEX) rose to $1,367.40 by late Friday afternoon, up from the prior week’s price of $1,344.90. The national average retail regular gasoline price decreased to $2.291 per gallon on July 4, $0.038 under the prior week’s price and $0.502 below a year ago.

Market/Index

2015 Close

Prior Week

As of 7/8

Weekly Change

YTD Change

DJIA

17425.03

17949.37

18146.74

1.10%

4.14%

Nasdaq

5007.41

4862.57

4956.76

1.94%

-1.01%

S&P 500

2043.94

2102.95

2129.90

1.28%

4.21%

Russell 2000

1135.89

1156.77

1177.36

1.78%

3.65%

Global Dow

2336.45

2323.19

2318.79

-0.19%

-0.76%

Fed. Funds rate target

0.25%-0.50%

0.25%-0.50%

0.25%-0.50%

0 bps

0 bps

10-year Treasuries

2.26%

1.44%

1.36%

-8 bps

-90 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

· Better news from the employment sector in June as the Bureau of Labor Statistics reported that 287,000 new jobs were added, compared to only 49,000 (revised) in May. Job growth occurred in leisure and hospitality, health care and social assistance, and financial activities. Unemployment increased by 0.2 percentage point to 4.9%, and the number of unemployed persons increased by 347,000 to 7.8 million. These increases largely offset declines in May and brought both measures back in line with levels that had prevailed from August 2015 to April. The employment participation rate increased slightly from 62.7 in May to 63.1 in June. In June, the average workweek for all employees
on private nonfarm payrolls was 34.4 hours for the fifth consecutive month, and the average hourly earnings for all employees on private nonfarm payrolls edged up $0.02 to $25.61. Over the year, average hourly earnings have risen by 2.6%.

· Factory orders fell $4.6 billion, or 1.0%, in May to $455.4 billion. This follows a 1.8% increase in April. Durable goods orders dropped $5.4 billion, or 2.3%, to $230.4 billion. A telling aspect of this report is the overall weakness in business investment, reflective of a lack of expectations for growth in manufacturing and consumer sales.

· Imports once again outpaced exports in May, as the trade gap rose 10.1% from April. According to the Census Bureau, the goods and services deficit was $41.1 billion, up $3.8 billion from April. May’s exports were $182.4 billion, while imports were $223.5 billion–$3.4 billion more than April imports. However, year-to-date, the goods and services deficit decreased $7.2 billion, or 3.5%, from the same period in 2015. Exports decreased $47.2 billion or 4.9%. Imports decreased $54.3 billion or 4.7%. As has been the case for a while now, the strength of the dollar abroad continues to weaken demand for U.S. goods and services.

· According to the latest Non-Manufacturing ISM® Report On Business®, economic activity in the non-manufacturing sector grew in June. The Non-Manufacturing Index registered 56.5% in June, 3.6 percentage points higher than the May reading of 52.9%. The Non-Manufacturing Business Activity Index increased 4.4 percentage points, the New Orders Index® increased by 5.7 percentage points, and the Employment Index grew 3 percentage points. Those non-manufacturing industries reporting growth in June include mining; arts; entertainment and recreation; retail trade; health care and social assistance; utilities; and real estate.

· The minutes from FOMC’s June meeting were released last week. It is clear that the overwhelming deterrent to raising interest rates was the May employment report, which showed only 38,000 (prior to its revision to 49,000) new jobs added.

· In the week ended July 2, the advance figure for seasonally adjusted initial unemployment insurance claims was 254,000, a decrease of 16,000 from the previous week’s unrevised level. The advance seasonally adjusted insured unemployment rate bumped up to 1.6%. The advance number for seasonally adjusted insured unemployment during the week ended June 25 was 2,124,000, a decrease of 44,000 from the previous week’s revised level.

Eye on the Week Ahead

Inflation is front and center next week as the latest reports on retail sales and producer and consumer prices are available. Growth in producer prices and consumer spending has been subdued as inflation remains below the Fed’s target rate of 2.0%. With retail sales accounting for almost one-half of total consumer spending, next week’s report should help define where the economy is heading.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

Market Week: July 5, 2016

July 5th, 2016

The Markets (as of market close July 1, 2016)

The beginning of the week saw equities still reeling from the Brexit vote. However, the markets closed with a flourish, recouping all of the losses from the prior week. Each of the indexes listed here enjoyed positive returns by week’s end with each index gaining over 3.0% week-over-week, except the Russell 2000, which finished the week up about 2.6%. Year-to-date, only the Nasdaq and Global Dow remain below their 2015 closing values, but they’re gaining ground. While equities gained some traction, long-term bond yields touched lows that hadn’t been seen in quite some time.

Crude oil (WTI) closed at $49.28 a barrel last week, up $1.71 from the previous week. The price of gold (COMEX) rose to $1,344.90 by late Friday afternoon, up from the prior week’s price of $1,319.10. The national average retail regular gasoline price decreased to $2.329 per gallon on June 27, $0.024 under the prior week’s price and $0.472 below a year ago.

Market/Index

2015 Close

Prior Week

As of 7/1

Weekly Change

YTD Change

DJIA

17425.03

17400.75

17949.37

3.15%

3.01%

Nasdaq

5007.41

4707.98

4862.57

3.28%

-2.89%

S&P 500

2043.94

2037.41

2102.95

3.22%

2.89%

Russell 2000

1135.89

1127.54

1156.77

2.59%

1.84%

Global Dow

2336.45

2250.69

2323.19

3.22%

-0.57%

Fed. Funds rate target

0.25%-0.50%

0.25%-0.50%

0.25%-0.50%

0 bps

0 bps

10-year Treasuries

2.26%

1.55%

1.44%

-11 bps

-82 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

· The third estimate of the first quarter 2016 gross domestic product–the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes–increased at an annual rate of 1.1%. The second estimate for the first quarter GDP showed an increase of only 0.8%. The third estimate is based on more complete data. The primary difference between the second and third estimates for the first quarter GDP is that exports increased more than previously estimated. In the fourth quarter of 2015, the GDP increased 1.4%. Compared to the fourth quarter, total business investment declined as did consumer spending in the first quarter 2016. The economy traditionally starts off slower during the first three months of the year, often picking up speed over the spring and summer months, leading to guarded optimism for the second quarter GDP.

· Personal income increased $37.1 billion, or 0.2%, and disposable personal income (net after taxes) increased $33.9 billion, or 0.2% in May, according to the Bureau of Economic Analysis. Personal consumption expenditures, the Federal Reserve’s preferred inflation measure, increased $53.5 billion, or 0.4%. Compared to April, both income and spending (PCE) slowed in May. In April, personal income increased $75.4 billion, or 0.5%, DPI increased $68.6 billion, or 0.5%, and PCE increased $141.2 billion, or 1.1%, based on revised estimates.

· The trade gap between imports and exports grew in May, according to the latest report from the Census Bureau. Exports for May were at $119.0 billion, while imports came in at $179.6 billion, resulting in a trade deficit of roughly $60.6 billion. Exports fell 0.2% from April, and imports increased a sharp 1.6%. The trade gap in April was $57.5 billion.

· Home prices continue to rise according to the latest report from the S&P/Case-Shiller Home Price Index, which reported a 5.0% annual gain in April, down from 5.1% the previous month. Before seasonal adjustment, the National Index posted a month-over-month gain of 1.0% in April.

· Following three straight months of gains, pending home sales took a step back in May, according to the National Association of Realtors®. The Pending Home Sales Index dropped 3.7% to 110.8 in May from a downwardly revised 115.0 in April. Low mortgage rates and scant inventory are pushing home prices higher, affecting the number of home sales.

· US manufacturers expressed guarded optimism in May and June as manufacturing expanded. The Institute for Supply Management® (ISM®) Purchasing Managers’ Index® registered 51.3 for May, an increase of 0.5 percentage point from April’s reading of 50.8. According to the report, new orders and production were seen as growing, while employment and inventories were contracting. The seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 51.3 in June, up from 50.7 in May, and the highest reading for three months. Higher levels of production, new orders, and employment all helped to boost the index.

· The Conference Board Consumer Confidence Index® increased to 98.0 in June, up from 92.4 in May. The Present Situation Index increased from 113.2 to 118.3, while the Expectations Index rose from 78.5 to 84.5 in June. According to the Conference Board’s Lynn Franco, “Consumers were less negative about current business and labor market conditions, but only moderately more positive, suggesting no deterioration in economic conditions, but no strengthening either.”

· In the week ended June 25, the advance figure for seasonally adjusted initial unemployment insurance claims was 268,000, an increase of 10,000 from the previous week’s unrevised level. The advance seasonally adjusted insured unemployment rate dropped to 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended June 18 was 2,120,000, a decrease of 20,000 from the previous week’s revised level.

Eye on the Week Ahead

Equities markets, at least domestically, seem to have halted the downfall from the UK’s referendum vote to withdraw from the European Union. How this major world event affects other economic indicators remains to be seen. This week, important reports on international trade and the employment situation are released.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

Market Week

July 1st, 2016

The Markets

The Brexit referendum vote sent a tidal wave of negative returns throughout the world’s stock markets, including the indexes listed here. The large-cap Dow lost over 270 points on the week and, along with the S&P 500, dropped over 1.50% from the prior week. In fact, with this week’s performance, gains that had been made over the close of 2015 have been given back as each of the indexes listed here are below their 2015 closing values.

In addition to stock markets around the world being battered, European currencies took a hit, particularly the British pound, which dropped by more than 11.0% compared to the dollar. Yields on long-term government bonds also fell. The price of gold followed the prior week’s gains with another week of increasing value.

Crude oil (WTI) closed at $47.57 a barrel last week, down $0.69 from the previous week. The price of gold (COMEX) rose to $1,319.10 by late Friday afternoon, up from the prior week’s price of $1,301.60. The national average retail regular gasoline price decreased for the first time in six weeks to $2.353 per gallon on June 20, $0.046 under the prior week’s price and $0.459 below a year ago.

Market/Index

2015 Close

Prior Week

As of 6/24

Weekly Change

YTD Change

DJIA

17425.03

17675.16

17400.75

-1.55%

-0.14%

Nasdaq

5007.41

4800.34

4707.98

-1.92%

-5.98%

S&P 500

2043.94

2071.22

2037.41

-1.63%

-0.32%

Russell 2000

1135.89

1144.70

1127.54

-1.50%

-0.74%

Global Dow

2336.45

2300.22

2250.69

-2.15%

-3.67%

Fed. Funds rate target

0.25%-0.50%

0.25%-0.50%

0.25%-0.50%

0 bps

0 bps

10-year Treasuries

2.26%

1.61%

1.55%

-6 bps

-71 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be
used to benchmark performance of specific investments.

Last Week’s Headlines

· British Prime Minister David Cameron vowed to resign following Britain’s surprise referendum vote last week to exit the European Union. Stock markets around the world plummeted, and the British pound fell by as much as 11% following news of the vote. Roughly 17.4 million United Kingdom voters chose to exit the European Union by 51.8% of the vote. With the vote, the UK has two years to negotiate its withdrawal from the EU. To formally exit the EU, the UK must invoke Article 50 of the Lisbon Treaty. Since Article 50’s adoption in 2009, no member country has exited the EU, so how the process will work is relatively unknown as this is the first time Article 50 will be invoked. Until then, EU treaties and laws will continue to apply to the UK.

· Basically, the EU is an economic and political partnership of 28 countries operating as a single market, which allows free movement of goods, services, money, and people within the EU as if it were a single country. With the EU’s second-largest economy voting to exit the EU, many issues remain to be resolved, including determining the status of UK citizens working in the EU and vice versa, whether travel restrictions will apply to UK citizens seeking to move about the EU, trade ramifications between the UK and the EU, and the status of Scotland and Northern Ireland, both of which voted to remain in the EU. Finally, it is important to note that the referendum vote is not legally binding. Parliament must pass laws to formally withdraw from the EU. In short, much is still to be determined, meaning Brexit will be in the news for quite some time to come.

· It was a busy week for FOMC Chair Janet Yellen, who appeared before the Senate Banking Committee and the House Financial Services Committee. Submitting identical remarks before both committees, Yellen reiterated the need to maintain a cautious monetary approach regarding the economy. Citing the Brexit vote, China’s economic situation, stalled labor growth, and inflation that remains below the Fed’s target 2.0% rate, Yellen said the expectation is that the economy will improve over time. However, the pace of improvement is uncertain, so the timing of interest rate adjustments is not on a preset or predictable course.

· Falling durable goods orders in May provided some justification for the Fed’s cautious stance on projected economic growth. New orders for durable goods (expected to last at least three years) fell 2.2% to $230.7 billion following two consecutive months of gains. According to the Census Bureau, excluding transportation, new orders decreased 0.3%. Excluding defense, new orders decreased 0.9%. Durable goods shipments (-0.2%), inventories (-0.3%), and new orders for nondefense capital goods (-0.8%) each fell short of their April totals. But the biggest impact on May’s orders was felt in new orders for defense capital goods, which dropped 28.0%. Businesses are not upping investment in durable goods, presumably because there is no need to ramp up sales to meet consumer demand. But it is worth noting that overall durable goods orders are up 1.7% for the first five months of 2016 compared to the same period last year.

· Existing home sales picked up the pace in May, according to the National Association of Realtors®. Total existing home sales grew 1.8% to a seasonally adjusted annual rate of 5.53 million, up from a downwardly revised 5.43 million in April. Sales are 4.5% ahead of the May 2015 rate, and are at their highest annual pace since February 2007. The median existing-home price for all housing types in May was $239,700, up 4.7% from May 2015. Total housing inventory jumped 1.4% to 2.15 million existing homes available for sale, which represents a 4.7-month supply–the same as April.

· On the other hand, new home sales edged downward in May, according to the latest report from the Census Bureau. Sales of new single family homes fell 6.0% in May to an adjusted annual rate of 551,000–35,000 below April’s revised annual rate of 586,000. May’s figure is still 8.7% above May 2015. While the pace of new home sales clearly slowed in May, sales are still moving at a favorable pace, particularly compared to April, which marked the fastest sales pace since February 2008. The median sales price of new houses sold in May 2016 was $290,400; the average sales price was $358,900. The seasonally adjusted estimate of new houses for sale at the end of May was 244,000. This represents a supply of 5.3 months at the current sales rate.

· Consumers are a little less confident in the economy moving forward, according to June’s Surveys of Consumers from the University of Michigan. The Index of Consumer Sentiment fell to 93.5 in June from 94.7 in May and 96.1 in June of 2015. The Current Economic Conditions Index, and indication of spending, was positive, as June’s reading of 110.8 was greater than May’s 109.9. Generally, consumer sentiment has remained strong over the last 18 months, particularly bolstered by positive assessments of personal finances.

· In the week ended June 18, the advance figure for seasonally adjusted initial unemployment insurance claims was 259,000, a decrease of 18,000 from the previous week’s unrevised level of 277,000. The advance seasonally adjusted insured unemployment rate remained at 1.6%. The advance number for seasonally adjusted insured unemployment during the week ended June 11 was 2,142,000, a decrease of 20,000 from the previous week’s revised level.

Eye on the Week Ahead

The last week of the month and quarter is highlighted by the final estimate of the first-quarter GDP and the latest figures on personal income and outlays. Particular attention will be paid to personal consumption expenditures (PCE)–an important measure of inflation according to the Federal Open Market Committee. It will be interesting to see how Wall Street responds following the upheaval caused by the Brexit vote.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

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