Stocks ended June with weekly losses but were mostly higher for the first half.
In the U.S., both the Dow and S&P 500 lost 1.3% last week, although that was better than NASDAQ, which fell 2.4%. For the first half, however, tech-heavy NASDAQ easily outperformed the two blue-chip indexes, rising 8.8% versus the S&P’s 1.7% gain and the Dow’s 1.8% loss. At least in price terms, U.S. stocks outperformed their foreign counterparts for the first half. The Stoxx Europe 600 lost 2.4% year-to-date while German stocks lost 4.7%. In Asia, the Shanghai composite took a drubbing, losing nearly 14% for the half after falling more than 10% in the second quarter, ending June at a two-year low. Japanese stocks were down 2.0% for the half despite a 4.0% gain in Q2.
Yields on U.S. Treasury securities were mostly lower for the third straight week but sharply higher from where they started the year. The benchmark 10-year note ended the first half at 2.86%, 45 basis points higher than where it started the year but down from the mid-May peak of 3.11%. Oil prices continued to surge, climbing 8.4% last week to close at about $74.33, their highest price since late 2014 and up more than 25% since the beginning of the year.
Economic reports released during the last week of the quarter were a bit disappointing. The second and final revision of first quarter GDP showed the economy growing at an even 2.0% annualized pace, down from the previous estimate of 2.2%. However, Treasury Secretary Steven Mnuchin, while cautioning that he had no advance knowledge, said “We’re expecting a big second quarter GDP number,” citing the Federal Reserve Bank of Atlanta’s current projection of 4.7%. Consumer confidence figures for June came in below expectations. The Conference Board’s consumer confidence index fell more than two points to 126.4 from 128.8 in May whilethe University of Michigan’s consumer sentiment index ended the month at 98.2, up slightly from a month earlier but down from the mid-June reading. Both surveys showed a decline in future expectations. That may have played a role in weaker consumer spending in May, which rose a lower-than-expected 0.2%, down from the prior month’s 0.5% increase. Personal incomes, however, rose 0.4%, in line with expectations. The core personal consumption expenditures index, the Fed’s preferred inflation indicator, rose 0.2% in May and 2.0% versus a year earlier excluding food and energy, the latter figure the biggest annual gain since March 2012, indicating that inflation is heating up.
Housing figures were mixed. Pending home sales fell 0.5% in May, the fifth straight monthly decline on an annualized basis, but sales of new homes jumped 6.7% to an annualized rate of 689,000, well above forecasts, helped by a 1.7% cut in the median price of a new home to $313,000. The S&P CoreLogic Case-Shiller national home price index also showed price gains moderating somewhat, with the 20-city index rising 0.2% in April, down from March’s 0.4% gain. Elsewhere, durable goods orders fell 0.6% in May, dragged down by a 4.2% drop in vehicle orders, while orders for core capital goods slipped 0.2%, down from the prior month’s upwardly revised 2.3% jump.
Reports/dates/facts/links worth paying attention to over the next week:
1. July 2: Institute for Supply Management manufacturing index for June; construction spending for May.
2. July 3: Factory orders for May; auto sales for June.
3. July 4: U.S. markets closed for Independence Day.
4. July 5: Weekly unemployment claims; national employment report for June; ISM non-manufacturing index for June; the minutes of the Federal Reserve’s June 13 monetary policy meeting are released.
5. July 6: Employment situation for June.