{"id":891,"date":"2012-07-23T19:35:03","date_gmt":"2012-07-24T01:35:03","guid":{"rendered":"http:\/\/www.sunlakesofarizona.com\/blog\/?p=891"},"modified":"2012-07-23T19:35:03","modified_gmt":"2012-07-24T01:35:03","slug":"economic-notes-for-the-week-of-july-23rd","status":"publish","type":"post","link":"https:\/\/dev.sunlakesofarizona.com\/blog\/2012\/07\/economic-notes-for-the-week-of-july-23rd\/","title":{"rendered":"Economic Notes for the Week of July 23rd"},"content":{"rendered":"

Positive <\/strong><\/p>\n

Headline CPI<\/strong> was unchanged in June, in line with expectations.\u00a0 The food index rose 0.2% in June.\u00a0 The energy index continued to fall by 1.4%, the third straight declining month following 1.7% and 4.3% drops in April and May respectively.\u00a0 Fuel oil saw the steepest price reduction with a 7.9% drop from May.\u00a0 Excluding food and energy, the core index increased 0.2% month-over-month and was up 2.2% year-over-year.\u00a0 Overall, inflation risk is muted.<\/p>\n

Other closely watched data include June\u2019s industrial production and capacity utilization.\u00a0 Industrial production<\/strong> was up 0.4%, slightly above the market-expected 0.3%.\u00a0 It reversed a -0.2% decline trend in May.\u00a0 Capacity utilization<\/strong> for total industry increased 0.2% in June to 78.9%, still well below the long-term average rate of 80.3% over the last four decades.<\/p>\n

Negative <\/strong><\/p>\n

Retail sales<\/strong> fell 0.5% in June, missing the consensus expectation of 0.2% month-over-month.\u00a0 Retail sales ex-autos were down 0.4% lower than the expected 0.1% gain.\u00a0 Consumers cut spending at retail businesses for a third straight month since April.\u00a0 In June, weaker demand was most evident at gasoline stations, building materials and garden suppliers, furniture stores, and electronics and appliance outlets, with sales declining between -0.8% and -1.8% compared to May.<\/p>\n

\u00a0<\/strong><\/p>\n

Mixed <\/strong><\/p>\n

The July Empire State Manufacturing Survey <\/strong>indicated that manufacturing activity in New York expanded modestly over the month.\u00a0 The general business conditions index rose from 2.3 in June to 7.4 in July, exceeding the median forecast level of 3.8.\u00a0 The index level was boosted mainly due to an increase in shipments and an improved employment level.\u00a0 However, for the first time since November 2011, the new orders index dipped below zero in July, from 2.2 in June to -2.7.<\/p>\n

Survey respondents were also asked if they had recently changed their production plans for the second half of 2012.\u00a0 26% responded they had ramped up 2H12 productions, slightly higher than the 22% who said they were scaling back their production plans.\u00a0 The survey results are more optimistic than in July 2011, when downward revisions in production plans outnumbered upward revisions.\u00a0 To put this into perspective, in July 2009, during the trough of the recession, an exceedingly high number of respondents (63%) said they had reduced their production plans.<\/p>\n

Source: Federal Reserve Bank of New York<\/em><\/p>\n

In the week ending July 14, the initial number of unemployment claims<\/strong> was 386,000, short of the expected 365,000.\u00a0 The number of claims was also 34,000 higher than the previous week\u2019s revised number of 352,000.\u00a0 The uptick in initial claims was likely due to a change in the timing of annual automobile factory shutdowns.\u00a0 To meet increased demand, several automakers trimmed their mid-year, two-week shutdown to only one-week.\u00a0 They ramped up auto production during the week ending July 7, helping initial claims reduction by 26,000 to 350,000.\u00a0 So now, we are seeing the reverse pattern.\u00a0 Continuing claims<\/strong> were 3.314 million for the week ending July 7, slightly below the median forecast of 3.3 million. The Labor Department reported that the total number of people claiming benefits in all programs for the week ending June 30 was 5.75 million.<\/p>\n

Housing starts<\/strong> in June were up 6.9% to a seasonally adjusted annual rate of 760,000 units, the highest rate since October 2008.\u00a0 The rate exceeded the median forecast of a 745,000-unit rate in a Reuters poll.\u00a0 Strong housing starts were driven by a 4.7% increase in single-family starts and 12.8% in multi-family starts.\u00a0 A slight red flag was raised in the number of new permits for building homes, which declined by 3.7% to 755,000.\u00a0 This was more than the anticipated -2.4%.\u00a0\u00a0 Building permits<\/strong> usually offer a better gauge of future activity.<\/p>\n

Existing home sales<\/strong> in June were disappointingly down 5.4% versus May, but were up 4.5% from a year ago.\u00a0 The market expected to see 4.65 million-unit completed sales transactions, which were 280,000 above June\u2019s actual home sales number.\u00a0 However, existing home-for-sales inventory remains very tight, which supports the sales price.\u00a0 In June, the sales price continued to rise, up 5% month-to-month and 7.9% year-over-year.<\/p>\n

Source: National Association of Realtors<\/em><\/p>\n

Market Notes <\/em><\/strong><\/p>\n\n\n\n\n\n\n\n\n\n
Period ending 7\/20\/2012<\/strong><\/td>\n\n

1 Week (%)<\/strong><\/p>\n<\/td>\n

\n

YTD (%)<\/strong><\/p>\n<\/td>\n<\/tr>\n

DJIA<\/td>\n\n

0.42<\/p>\n<\/td>\n

\n

6.51<\/p>\n<\/td>\n<\/tr>\n

S&P 500<\/td>\n\n

0.46<\/p>\n<\/td>\n

\n

9.65<\/p>\n<\/td>\n<\/tr>\n

Russell 2000<\/td>\n\n

-1.17<\/p>\n<\/td>\n

\n

7.63<\/p>\n<\/td>\n<\/tr>\n

MSCI-EAFE<\/td>\n\n

0.43<\/p>\n<\/td>\n

\n

1.96<\/p>\n<\/td>\n<\/tr>\n

MSCI-EM<\/td>\n\n

1.16<\/p>\n<\/td>\n

\n

2.24<\/p>\n<\/td>\n<\/tr>\n

BarCap U.S. Aggregate<\/td>\n\n

0.43<\/p>\n<\/td>\n

\n

3.74<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n\n\n
U.S. Treasury Yields<\/strong><\/td>\n\n

3 Mo.<\/strong><\/p>\n<\/td>\n

\n

2 Yr.<\/strong><\/p>\n<\/td>\n

\n

5 Yr.<\/strong><\/p>\n<\/td>\n

\n

10 Yr.<\/strong><\/p>\n<\/td>\n

\n

30 Yr.<\/strong><\/p>\n<\/td>\n<\/tr>\n

12\/31\/2011<\/td>\n\n

0.02<\/p>\n<\/td>\n

\n

0.25<\/p>\n<\/td>\n

\n

0.83<\/p>\n<\/td>\n

\n

1.89<\/p>\n<\/td>\n

\n

2.89<\/p>\n<\/td>\n<\/tr>\n

7\/13\/2012<\/td>\n\n

0.10<\/p>\n<\/td>\n

\n

0.25<\/p>\n<\/td>\n

\n

0.63<\/p>\n<\/td>\n

\n

1.52<\/p>\n<\/td>\n

\n

2.58<\/p>\n<\/td>\n<\/tr>\n

7\/20\/2012<\/td>\n\n

0.09<\/p>\n<\/td>\n

\n

0.22<\/p>\n<\/td>\n

\n

0.59<\/p>\n<\/td>\n

\n

1.49<\/p>\n<\/td>\n

\n

2.55<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

S&P 500 stocks\u2019 2Q12 Earnings Season <\/strong><\/p>\n

Last week was the first big one for S&P 500 companies as many released their 2nd quarter earnings reports.\u00a0 Since the first major U.S. company, Alcoa, released its Q2 earnings on July 9th, a total of 104 companies have reported earnings for 2Q12.\u00a0 74% have beaten EPS estimate, in aggregate by 5.3% above expectations.\u00a0 This percentage is slightly higher than the past four-year average of 68%.\u00a0 Last Thursday, positive earnings surprises carried domestic equity markets higher to their highest level since the spring.<\/p>\n

However, only 45% of reported companies generated sales above the mean estimate.\u00a0 This percentage is well below the recent average of 56% and is the lowest percentage of companies to beat sales estimates since 1Q09 (31%).<\/p>\n

The blended earnings growth rate for 2Q12 is 2.7%.\u00a0 The financial sector bounced back from a terrible quarter last year and reported the highest earnings growth rate at 54% year-over-year.\u00a0 The energy sector saw the lowest earnings growth rate at -22% in Q2.<\/p>\n

In terms of revenues, the blended growth rate for reported companies in Q2 is 0.7%, dragged down by a -16.3% sales decline in energy.\u00a0 Higher costs, negative currency impacts, and the global economic slowdown all contributed to lower revenue growth.<\/p>\n

Looking ahead, 3Q12 earnings guidance is not encouraging.\u00a0 18 companies have reportedly issued negative EPS guidance.\u00a0\u00a0Only 4 companies have raised their Q3 EPS guidance.\u00a0 Meanwhile, analysts expect flat earnings growth in Q3 and 12.2% in Q4.<\/p>\n

This week will be the second \u201cpeak\u201d week of 2Q12 earnings season.\u00a0 172 companies in the S&P 500 and 10 companies in the Dow 30 are scheduled to report earnings.<\/p>\n

Fed warns of rising risks to economic growth<\/strong><\/p>\n

Federal Reserve Chairman Ben Bernanke testified in front of the Senate Banking Committee last week.\u00a0 He reiterated the central bank is prepared to react if the economic situation continues to deteriorate.\u00a0 He confirmed that the \u201crisks to economic growth have increased.\u201d<\/p>\n

Have a good week.<\/p>\n

Karl Schroeder, RFC, CSA, AACEP<\/p>\n

Investment Advisor Representative<\/p>\n

Schroeder Financial Services, Inc.<\/p>\n

480-895-0611<\/p>\n

Sources:\u00a0 FocusPoint Solutions, Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, Goldman Sachs, JPMorgan Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Thomson Reuters, Schroder\u2019s, Standard & Poor\u2019s, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research, FactSet.\u00a0 Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return\/excluding dividends.\u00a0 Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.<\/p>\n

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.\u00a0 All information and opinions expressed are subject to change without notice.\u00a0 Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.\u00a0 Schroeder Financial Services, Inc. is a registered investment advisor.<\/p>\n","protected":false},"excerpt":{"rendered":"

Positive Headline CPI was unchanged in June, in line with expectations.\u00a0 The food index rose 0.2% in June.\u00a0 The energy index continued to fall by 1.4%, the third straight declining month following 1.7% and 4.3% drops in April and May respectively.\u00a0 Fuel oil saw the steepest price reduction with a 7.9% drop from May.\u00a0 ExcludingRead more<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-891","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/891","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/comments?post=891"}],"version-history":[{"count":2,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/891\/revisions"}],"predecessor-version":[{"id":893,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/891\/revisions\/893"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=891"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=891"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=891"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}