Weekly Market Update: 23 July 2010

The Economy 

• Global economic data was mixed, with mostly negative news in the U.S. However, investors largely shrugged off the weakness in the housing and labor markets and focused instead on better-than-expected corporate earnings reports.
• U.S. Federal Reserve (Fed) Chairman Bernanke stated he was ready to act if the economy experienced further signs of weakening but was hesitant about doing so. He described the current economic outlook as “unusually uncertain.”
• The U.S. index of leading economic indicators dropped 0.2% in June, marking two declines in the last three months. 
• Housing starts in the U.S. for the month of June were 549,000, falling to their lowest level since October 2009. However, building permits in June increased by 2.1%.
• Sales of existing homes in the U.S. posted less of a decline than forecast.
• The National Association of Home Builders confidence index declined to its lowest level since April 2009.
• According to the Mortgage Bankers Association, mortgage applications rose to their highest level in nine months due to record-low mortgage rates. Refinancing activity also picked up for similar reasons, climbing 8.6%.
• U.S. initial jobless claims were higher than expected, showing continued weakness in the labor market.
• The International Monetary Fund forecasted that growth will in the eurozone will continue but at a pace of less than 2% through 2012.
• Gross domestic product in the U.K. grew by 1.1% over the second quarter of 2010.
• German business confidence, as measured by the Ifo Business Climate Index, rose by its largest amount in two decades in June.

Economic Calendar 

• The Richmond Fed Manufacturing Index and the ABC News Consumer Comfort Index will be released July 27.
• Durable-goods orders and the Fed’s Beige book will be released July 28.
• Initial jobless claims and continuing claims will be released July 29.
• Gross domestic product, the Employment Cost Index, the Chicago Purchasing Manager Index and the University of Michigan consumer confidence will be released July 30.

Stocks

• Investors’ appetite for risk returned, as cyclical sectors led the global equity markets.
• In the U.S., growth stocks outperformed their value counterparts, and small-company stocks outperformed their large-company brethren. Materials performed best, while Healthcare performed worst.
• In the U.K., Materials, Financials and Consumer Discretionary performed best. Healthcare, Consumer Staples and Energy lagged.
• In Europe, Materials, Industrials and Consumer Services led the way, while Healthcare, Information Technology and Consumer Staples underperformed the broader market.

Bonds 

• Global bond markets were slightly positive, with non-government bonds outperforming government bonds.
• Government bonds yields rose, as better-than-expected corporate profits created a calmer atmosphere for investors.
• High-yield and emerging-market bonds performed better than the investment-grade corporate sector.

 

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice. This information is for educational purposes only.

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