Week in Review June 23, 2017
Led by a rebounding tech sector, U.S. stocks finished higher last week.
NASDAQ gained 1.9%, recouping about three-quarters of what it lost the previous two weeks. The Dow and S&P 500 were up slightly. Price gains in the latter two indexes were held down by oil prices, which continued to drop. U.S. crude closed down 4% on the week at about $43 a barrel, its lowest level since early 2016. The price of oil has now dropped 20% so far this year and shows little sign of bottoming out. Energy stocks in the S&P 500 fell 2.9% for the week, their worst performance since February 2016.
The Federal Reserve’s decision to raise interest rates at its June 13-14 meeting may be its last one for a while, according to at least two Fed voters. Charles Evans, the president of the Chicago Fed, told the Wall Street Journal that “we could wait until the end of the year” before raising rates again because of recent weak inflationary pressures. Earlier, Dallas Fed president Robert Kaplan said, “I’m going to need to see improvement” in inflation before voting for another rate rise. Yields on Treasury securities were mostly lower last week, with the yield on the benchmark 10-year note closing at 2.14%, down one basis point on the week but five bps off its high point of the week.
Chinese stocks rebounded 1.1% after falling by a similar percentage the previous week. The market may have gotten a lift from MSCI, a leading provider of global equity indexes, which said it will be adding China A shares to its emerging market index. Moody’s Investors Service called the move “significant” because it “will pave the way for global capital inflows” into Chinese equities. The Shanghai composite index has lagged far behind other major country indexes so far this year, rising only 1.7%. By comparison, Hong Kong’s Hang Seng index is up 16.7% year to date. European stocks were down for the third week in a row, the Stoxx Europe 600 falling 0.3%.
The U.S. housing sector rebounded in May, both in terms of sales and prices. Sales of existing homes, by far the largest category, rose 1.1% last month to an annual rate of 5.62 million, beating the consensus forecast of 5.55 million. Sales fell 2.5% in April. “The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level," said Lawrence Yun, the chief economist of the National Association of Realtors, which compiles the data. The median sales price rose 3.2% to $252,800, a record high. Sales of newly-built homes were also better than expected, rising 2.9% to an annual rate of 610,000. The median sales price jumped 11.5% to $345,800, which was also a record. Outside the housing sector, leading economic indicators rose 0.3% in May, in line with forecasts.
Reports/dates/facts/links worth paying attention to over the next week:
1. June 26: Chicago Fed national activity index for May; durable goods orders for May.
2. June 27: Conference Board consumer confidence index for June; S&P Corelogic Case-Shiller home price indexes for April.
3. June 28: Pending home sales for May.
4. June 29: Weekly unemployment claims; first quarter GDP, second and final revision.
5. June 30: Personal income and outlays for May; University of Michigan consumer sentiment index for June, second reading.