WEEKLY ECONOMIC UPDATE
July 20, 2011
DEBT ISSUES DOMINATE THE HEADLINES
Friday, President Obama reassured the media that Democrats and Republicans had “enough time” to “create a package that solves the deficit and debt.” While Congress needs to hike the debt cap by $2.4 trillion to enable federal borrowing through the end of 2012, Republican leaders want an equivalent federal spending cut linked to such a move. This week, House Republicans intend to vote on a plan to accomplish both goals, reliant on a constitutional amendment requiring a balanced federal budget. House Minority Leader Nancy Pelosi (D-CA) calls the measure “outrageous.” Another plan offered by Senate Minority Leader Mitch McConnell (R-KY) would give the President more autonomy to lift the debt cap. In Europe, Italy’s parliament passed austerity measures to cut $99 billion from that nation’s deficit by 2014.1,2,3
CONSUMER PRICES RETREAT 0.2% IN JUNE
This marks the first dip in the Consumer Price Index in 12 months. The big reason? Gasoline prices fell 6.8% last month. Stripping out food and energy prices, core CPI rose 0.3% in June (as it did in May). All this brought annualized inflation to 3.6% (1.6% in core terms). Producer prices also decreased last month – June’s PPI fell 0.4%, the first monthly decline in a year.4
CONSUMERS BUY A BIT MORE, FEEL WORSE
Consumer sentiment has plummeted. The initial July Thomson Reuters/University of Michigan survey came in at 63.8, the lowest reading in 28 months. Census Bureau data had retail sales improving 0.1% in June and 8.1% annually.5,6
GOLD PUSHES TOWARD $1,600
Futures settled at a new all-time peak Friday: $1,589.80 an ounce. That capped a 7.25% gain across two weeks, 3.15% of it coming last week.7
STOCKS PULL BACK
Here is how the major indices performed last week: S&P 500, -2.06% to 1,316.14; DJIA, -1.40% to 12,479.73; NASDAQ, -2.45% to 2,789.80.8
THIS WEEK: Monday offers 2Q results from IBM and Halliburton. Tuesday, we have earnings reports from Wells Fargo, Goldman Sachs, Apple, Yahoo, Coca-Cola and Bank of America plus data on June housing starts. Wednesday, we learn about June’s existing home sales and get earnings from Intel, Altria, Qualcomm, AmEx and eBay. Thursday brings 2Q results from Nokia, AT&T, Morgan Stanley, PepsiCo, Microsoft, AMD and SanDisk plus weekly initial and continuing claims figures. Friday, we have earnings from Caterpillar, GE, Honeywell, McDonalds and Verizon.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +7.79 +20.47 +3.24 +1.92
NASDAQ +5.16 +24.04 +7.39 +3.75
S&P 500 +4.65 +20.03 +1.29 +0.95
REAL YIELD 7/15 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.61% 1.21% 2.50% 3.50%
Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 7/15/118,9,10,11
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
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This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. 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. 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. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 – money.cnn.com/2011/07/15/markets/markets_newyork/ [7/15/11] 2 – online.wsj.com/article/BT-CO-20110715-711566.html [7/15/11]3 – nytimes.com/2011/07/16/world/europe/16italy.html [7/15/11]4 – online.wsj.com/article/SB10001424052702304521304576447641965268196.html [7/15/11]5 – cnbc.com/id/43768567/ [7/15/11]6 – census.gov/retail/marts/www/marts_current.pdf [7/14/11]7 – blogs.wsj.com/marketbeat/2011/07/15/data-points-energy-metals-500/ [7/15/11]8 – cnbc.com/id/43773110 [7/15/11]9 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F15%2F10&x=0&y=0 [7/15/11]9 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F15%2F10&x=10&y=18 [7/15/11]9 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F15%2F10&x=0&y=0 [7/15/11]9 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F14%2F06&x=0&y=0 [7/15/11]9 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F14%2F06&x=0&y=0 [7/15/11]9 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F14%2F06&x=0&y=0 [7/15/11]9 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F16%2F01&x=0&y=0 [7/15/11]9 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F16%2F01&x=0&y=0 [7/15/11]9 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F2%16F01&x=0&y=0 [7/15/11]10 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [7/15/11]10 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [7/15/11]11 – treasurydirect.gov/instit/annceresult/press/preanre/2001/ofm71101.pdf [7/11/01]12 – montoyaregistry.com/Financial-Market.aspx?financial-market=how-to-choose-a-financial-advisor&category=5 [7/17/11]
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