U.S. stocks closed narrowly mixed last week following a strong rally on Friday on optimism about Greece and a rebound in Chinese stocks. The major U.S. indexes all jumped over 1% on Friday, pushing the Dow Jones Industrial Average into the green for the week with a 0.2% gain while the S&P 500 ended largely unchanged. NASDAQ lost 0.2% for the week while the small-cap Russell 2000 gained 0.3%. Consumer staples were the best performers among the S&P 500, rising 2.0%. Bonds ended slightly lower, with yields on Treasury bonds falling most of the first half of the week on concern that a Greek deal wouldn’t happen, then reversed course when the outlook for a deal brightened. The 10-year Treasury note yield closed at 2.40%, up two basis points on the week. European stocks regained about half of what they lost the previous week on growing optimism that a new bailout for Greece could be reached soon. According to media reports late last week, the Greek government was moving closer to accepting austerity measures demanded by its creditors. The broad-based Stoxx Europe 600 gained 1.4% for the week after climbing more than 2% on Friday. The main German, Italian and Spanish indexes were up on the order of 2% or more. Ten-year German bund yields were about 12 basis points higher on the week as the possible prospect of a Greek deal calmed nervous investors, while yields on peripheral country debt were lower by about 10 basis points. The Greek stock exchange and the country’s banks remained closed, as they have been since June 26. The major Asian equity indexes were mostly lower last week except for China’s, which rebounded after falling sharply in each of the past three weeks. The Shanghai composite index rose 5.2% after dropping nearly 30% since hitting a recent peak on June 12. But the index remained volatile. The index gained nearly 6% on Thursday and another 5% on Friday after falling in eight of the previous 10 sessions. The Chinese government continued to try to come up with ways to shore up the plunging market. On Friday the China Banking Regulatory Commission authorized banks to extend repayment on loans backed by stock, which had been feeding the buying frenzy. Elsewhere, Hong Kong’s Hang Seng index fell 4.5%, its fourth weekly drop in a row, while Japan’s Nikkei 225 fell 3.7%, its sixth decline in the past seven weeks. India’s Sensex fell 1.5%, its first decline in the past four weeks. Federal Reserve Chair Janet Yellen said Friday the Fed is still on track to start raising interest rates later this year, although that decision remains at the mercy of economic growth and “unanticipated events.” “I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy,” Yellen said in a speech in Cleveland. “But I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step,” a likely reference to Greece and China. Earlier in the week, the Fed released the minutes of its June 16-17 monetary policy meeting, which was slightly more dovish than Yellen’s speech. The minutes showed that “most participants judged that the conditions for policy firming had not yet been achieved; a number of them cautioned against a premature decision.” Additionally, all members but one “indicated that they would need to see more evidence that economic growth was sufficiently strong” before raising rates. The International Monetary Fund once again urged the Fed to wait until next year before raising rates so as not to jeopardize the uneven U.S. economic recovery. The IMF lowered its global growth forecast for this year to 3.3% from its earlier estimate of 3.5% after cutting its U.S. growth forecast to 2.5% from 3.1%. WeeklyMarketSnapshot7102015 Reports/dates/facts/links worth paying attention to over the next week:
- July 14: Retail sales for June.
- July 15: Industrial production for June; producer price index for June; Federal Reserve Chair Janet Yellen presents her semi-annual monetary report to the House Financial Services Committee in Washington; Fed Beige Book; New York Fed Empire State manufacturing survey for July.
- July 16: Weekly unemployment claims; Fed Chair Yellen continues her testimony before the Senate Banking Committee; National Association of Home Builders housing market index for July; Philadelphia Fed business outlook survey for July.
- July 17: Consumer price index for June; housing starts for June; University of Michigan consumer sentiment index for July.
Copyright © 2015 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.