Week in Review August 4, 2017
The three big U.S. stock indexes had mixed results for the third straight week, with the Dow having the best gain and NASDAQ losing ground for the second straight week.
The Dow gained another 1.2% last week, duplicating its rise from the previous week, while NASDAQ lost 0.3%. The S&P 500 rose 0.2%. The Dow closed the week at 22093, its ninth straight increase and its eighth straight record close. The big-cap index pushed over the 22000 mark on Wednesday for the first time and never looked back. Year to date, NASDAQ still leads the way with an 18% price gain, followed by the Dow at 11.8% and the S&P at 10.6%. Bond prices were marginally higher on the week although lower on Friday. The benchmark 10-year Treasury note closed Friday at 2.26%, down three basis points on the week.
The July U.S. jobs report came in better than expected for the second month in a row. The economy added 209,000 jobs last month, about 30,000 more than forecasts, while the unemployment rate fell to 4.3% from 4.4%. The Labor Department also said average hourly earnings rose 0.3% and the labor participation rate inched up to 62.9%. The number of people with jobs rose to 153.5 million, a new high.
European stocks were higher for the first time in three weeks amid stronger economic growth in the euro zone. Both the broad-based Euro Stoxx 600 and Germany’s DAX were both up 1.1% for the week, with most of the gain coming on Friday. The European Union’s statistics office said GDP growth in the euro zone rose by 0.6% in the second quarter, 2.3% on an annualized basis. But sovereign bond prices were higher, lowering yields. The yield on the benchmark 10-year German bund, for example, fell eight basis points to 0.47%, its lowest level in a month. In Asia, Hong Kong stocks continued to roar ahead, rising 2.2% to raise their year-to-date gain to more than 25% in local currency terms.
In addition to the jobs report, several other important economic reports were released last week. Both of the ISM’s purchasing managers’ indexes lost ground in July: the manufacturing index fell 1.5 points to 56.3, while the non-manufacturing index, which covers most of the economy, dropped 3.5 points to 53.9. Factory orders rebounded a full 3.0% in June after falling 0.3% the previous month, although the increase was skewed by a big jump in aircraft orders. Construction spending fell 1.3%, well below expectations. In the consumer sector, personal incomes were unchanged in June after climbing 0.3% in May, while consumer spending rose a weak 0.1%. Auto sales dropped 7% in July, continuing an industry sales slowdown; while most of the decline has been in fleet sales, consumer sales are also down. In housing, pending home sales rose for the first time in four months, climbing 1.5% in June. But the National Association of Realtors cautioned that the low supply of homes for sale is “holding back activity.”
Reports/dates/facts/links worth paying attention to over the next week:
1. August 7: Consumer credit for June.
2. August 10: Weekly unemployment claims; producer price index for July.
3. August 11: Consumer price index for July.