Despite mostly rising on Friday, U.S. stocks were lower for the week, posting their sharpest weekly declines since March.
The Dow gained 0.5% on Friday to end an eight-day skid but was still down 2.0% for the week, pushing it back into the red for the year, down 0.6%. The S&P 500 was also up on Friday, rising 0.2% but down 0.9% for the week, although it’s still holding on to a 3.0% year-to-date gain. NASDAQ lost 0.3% on Friday and 0.7% for the week but is up 11.4% so far this year. Trade tensions continued to unnerve investors, but the repercussions are being more deeply felt outside the U.S. The Shanghai composite fell 4.4% for the week, lowering its YTD loss to 12.6%; the index is now at its lowest level in more than two years. Hong Kong stocks lost 3.2% while Japan’s Nikkei 225 fell 1.5%. European stocks were also lower, with Germany’s DAX down 3.3%.
U.S. Treasury bond yields were slightly lower as investors continued to seek a safe haven from equity risk even as Federal Reserve Chair Jerome Powell reiterated that more interest rate increases are coming. Speaking at theEuropean Central Bank’s annual policy conference in Portugal last week, Powell said, “Today, with the economy strong and risks to the outlook balanced, the case for continued gradual increases in the federal-funds rate remains strong.” The yield on the benchmark 10-year T-note ended the week at 2.89%, down three basis points on the week. At the short end of the curve, the yield on the 30-day T-bill ended the week at 1.83%, putting it just slightly below the dividend yield on the S&P 500, which it hasn’t surpassed in more than 10 years. The yield on the bill is up more than 100 bps in the past 12 months and nearly 60 bps YTD. Oil prices jumped nearly 6% on Friday and nearly 8% for the week after OPEC members reached an agreement to raise production that was below what the market expected.
Housing data were mostly negative, dragged down by a familiar reason: homes are getting too expensive. Salesof existing homes, by far the largest category, fell 0.4% last month to an annual rate of 5.43 million, which is down 3.0% from the year earlier. “There’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers,” said Lawrence Yun, the chief economist of the National Association of Realtors, which also reported that the median price of an existing home climbed to an all-time high of $264,800, up nearly 5% from a year earlier. The National Association of Home Builders’ housing market index fell two points in June to 68, 10 points below expectations. “Builders are optimistic about housing market conditions as consumer demand continues to grow,” said NAHB Chairman Randy Noel. But “record-high lumber prices,” mainly driven by higher tariffs on Canadian lumber, “are hurting housing affordability.” A report from ATTOM Data Solutions saidhome affordability fell in the first quarter to its lowest level in almost 10 years, before the housing crisis. On the plus side, housing starts rose 5.0% in May to an annual rate of 1.350 million, the highest level since July 2007. But building permits, a forward indicator, dropped 4.6%. Outside the housing sector, the Conference Board’s index of leading economic indicators rose 0.2% in May, down from April’s 0.4% rise.
Reports/dates/facts/links worth paying attention to over the next week:
1. June 25: New home sales for May; Chicago Fed national activity index for May.
2. June 26: Conference Board consumer confidence index for June; S&P Corelogic Case-Shiller home price indexes for April.
3. June 27: Durable goods orders for May; pending home sales for May.
4. June 28: Weekly unemployment claims; first quarter GDP, third and final revision.
5. June 29: Personal income and outlays for May; University of Michigan consumer sentiment index for June, second reading.