Economic news on the U.S. front was mixed this week, although signs of a slowdown continue to persist.<\/p>\n
Firstly, the advance estimate of the 2nd Quarter U.S. GDP<\/strong> came out at a +1.5% annualized rate.\u00a0 Believe it or not, this was largely in line with consensus expectations (lower than some, higher than some others from analysts who have been engaged in a race to lower these estimates as fast as possible).\u00a0 From a composition standpoint, growth in final domestic sales increased by the same +1.5%, consumer spending increased more than anticipated and investment in equipment\/software and housing were up +7% and +10% respectively.\u00a0 However, government spending was down on both the federal and state\/local levels.\u00a0 The GDP price index and core price indexes grew in the same range (+1.6% and +1.8%).<\/p>\n As officials keep tinkering with the data, 2010 results were revised downward a bit while 2011 numbers were pushed up.\u00a0 These GDP figures are always a work in progress and never as exact as many would like them to be (they can sometimes be revised up to a year or two later, in fact).\u00a0 The key question is will this force the Fed\u2019s hand in providing additional stimulus?\u00a0 The answer is probably a bit inconclusive.\u00a0 The growth rate is low, but largely as expected, so no negative surprises.\u00a0 Many estimates call for better growth in the second half of this year and into 2013.\u00a0 This may not be definite enough or soon enough for many policymakers, who are quite in tuned to not letting the economy continue to stall as it has each summer for the past several years.\u00a0<\/p>\n The durable goods<\/strong> orders report was mixed.\u00a0 While orders were up +1.6% versus a flat forecast, most of the increase was due to a +62% gain in defense industry orders.\u00a0 Other than that anomaly, non-defense orders were down -0.7% and core capital goods (nondefense ex-aircraft) were off by -1.4%.\u00a0 There were some upward revisions to prior data, though, which was a positive.<\/p>\n The Richmond Fed Survey, another regional manufacturing index tracked by folks lately in an attempt to get a glance at the \u2018margin\u2019 of what looks to be an inflection point between growth and stagnation, dropped in July to its lowest showing since April 2009.\u00a0 While not a great report, these regional releases tend to be a bit noisier than the more mainstream macro data.<\/p>\n Slightly better news on the housing front over the past few weeks has several economists excited (they certainly feel they need something to be excited about), but individual data points continue to be choppy coming in.\u00a0 The two charts below (esp. housing starts) demonstrate the very slow, yet positive progress happening here.\u00a0 (We apologize in advance for the small size\u2014when we borrow these types of things from outside sources, adjusting the size larger can either help or hurt.)<\/p>\n New home sales<\/strong> declined sharply in June by -8.4%, which fell short of forecasts calling for a half-percent gain or so.\u00a0 This offset a few revisions for prior months.\u00a0 Declines were mainly from the Northeast and South, while sales actually rose in the Midwest and West.<\/p>\n Pending home sales<\/strong> fell -1.4%, which ran counter to an expected gain of +0.3%.\u00a0 This measure tracks signed but not yet closed sales contracts, so leads the \u2018existing\u2019 home sales number by a few months.\u00a0 The Northeastern U.S. fared the worst (down almost -8%), while the West was up slightly.\u00a0<\/p>\n In other housing news, the FHFA house price index<\/strong> (homes using agency-conforming mortgages) rose by +0.8% month-over-month for June, about double what was expected.\u00a0 This index has risen four months in a row, similar to other home prices indexes.\u00a0 There appears to be some strengthening here.\u00a0<\/p>\n Initial jobless claims<\/strong> for the July 21st week fell to 353k, which markets took as a strong positive relative to the expected 380k figure.\u00a0 The four-week moving average claims number fell to 367k, largely in line with the trend of the past several months.\u00a0 Continuing claims came in at a close-to-expected 3,287k for the July 14th week (these don\u2019t tend to vary as much from forecast as initial claims do, anyway).\u00a0<\/p>\n Per the chart below, employment has been steadily improving, especially from mid-year last year.\u00a0 It may feel like a slow-moving job recovery, which it is, but there is positive progress occurring.\u00a0 Claims data in the summer tends to be a little more sporadic due to factory shutdown activity in the auto industry and other seasonal factors, so these are best taken from a longer-term trend basis.<\/p>\n Next week, the FOMC is meeting again, and be assured the most-watched issues will be whether or not (or how much) additional stimulus will be injected into the U.S. economy.\u00a0 The debate is ongoing concerning what forms this could take:\u00a0 additional bond purchases (Treasury or MBS), lowering the discount rate for banks in order to spur them to lend out additional credit to consumers and businesses instead of letting it sit, creating a \u2018nominal GDP\u2019 target instead of just an inflation target, or a combination of some tools, as the list goes on and on.\u00a0<\/p>\n While economies can be measured through numbers, the study itself is a \u2018social science\u2019 and for good reason.\u00a0 Economics deals with choices, the incentives for making certain choices, as well as disincentives for not making others.\u00a0 It\u2019s the softer side of the equation that determines hard-to-measure conditions like confidence.\u00a0 It also explains why, like human nature, confidence can be so fragile and often schizophrenic.\u00a0 Economists focused on the \u2018micro\u2019 might agree that these choices trickle up from individual businesses and consumers making choices based current and perceived conditions\u2014these can be fast-changing and often unpredictable, which explains why surveys can be a little \u2018noisy\u2019 month-to-month.\u00a0 Unknowns like the upcoming \u2018fiscal cliff,\u2019 even though many professionals believe the drastic effects of which can and will be avoided, continue to scare the public and business people to some extent.<\/p>\n The news of the week from Europe consisted of ECB president Draghi reinforcing market sentiment by stating the institution will \u2018whatever it takes\u2019 to preserve the Euro and those actions \u2018will be enough.\u2019\u00a0 Interesting comments and strong market reaction for those hoping to see a more confident stance (it was enough to boost stock markets worldwide and drop Spanish yields by almost \u00bd a percent).\u00a0 The big question, of course, is will it matter and will this be turning point everyone seems to be waiting for?\u00a0 The stronger language and attitude was certainly welcomed, but there are many politicians involved, as opposed to Draghi alone.\u00a0 He also emphasized that while the ECB would do everything it could within its mandate (which included acting to ensure bond spreads stay within the range of monetary policy action)\u2014such actions also require the participation of other leaders to ensure success.<\/p>\n Now, ensuring adequate follow-through may be key to sustained market confidence.<\/p>\n Market Notes <\/em><\/strong><\/p>\n 1 Week (%)<\/strong><\/p>\n<\/td>\n YTD (%)<\/strong><\/p>\n<\/td>\n<\/tr>\n 1.97<\/p>\n<\/td>\n 8.62<\/p>\n<\/td>\n<\/tr>\n 1.72<\/p>\n<\/td>\n 11.54<\/p>\n<\/td>\n<\/tr>\n 0.58<\/p>\n<\/td>\n 8.26<\/p>\n<\/td>\n<\/tr>\n 1.25<\/p>\n<\/td>\n 3.23<\/p>\n<\/td>\n<\/tr>\n 0.52<\/p>\n<\/td>\n 2.77<\/p>\n<\/td>\n<\/tr>\n -0.30<\/p>\n<\/td>\n 3.43<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n 3 Mo.<\/strong><\/p>\n<\/td>\n 2 Yr.<\/strong><\/p>\n<\/td>\n 5 Yr.<\/strong><\/p>\n<\/td>\n 10 Yr.<\/strong><\/p>\n<\/td>\n 30 Yr.<\/strong><\/p>\n<\/td>\n<\/tr>\n 0.02<\/p>\n<\/td>\n 0.25<\/p>\n<\/td>\n 0.83<\/p>\n<\/td>\n 1.89<\/p>\n<\/td>\n 2.89<\/p>\n<\/td>\n<\/tr>\n 0.09<\/p>\n<\/td>\n 0.22<\/p>\n<\/td>\n 0.59<\/p>\n<\/td>\n 1.49<\/p>\n<\/td>\n 2.55<\/p>\n<\/td>\n<\/tr>\n 0.11<\/p>\n<\/td>\n 0.25<\/p>\n<\/td>\n 0.65<\/p>\n<\/td>\n 1.58<\/p>\n<\/td>\n 2.63<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Markets this week were generally higher as stronger sentiment later in the week (see Draghi above) overcame early weakness.\u00a0 U.S. large-caps outperformed small-caps.\u00a0 From an industry standpoint, telecom and financials led while materials and technology lagged.<\/p>\n \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\n The shining star of the last few years, Apple, missed analyst earnings targets and lowered future expectations\u2014which brought down the entire tech sector due to the large market cap.\u00a0 The miss appeared to be tied to lower iPhone sales, perhaps as consumers are anticipating a new model out later this year.\u00a0 As of Friday, just under 60% of S&P companies have reported earnings; of this number, 72% have beaten their earnings estimates, while 40% have surpassed revenue estimates…only a third have beaten on both top- and bottom-lines.\u00a0 Expectations for forward-looking quarters are also low, and reflect uncertainty on many fronts (although, as we know, estimates can be quickly revised up or down in either direction as conditions change…so worth taking with a grain of salt to some degree).<\/p>\n Despite the Draghi comments, domestic stocks outearned foreign issues, although several key EU nations like Spain, Italy, France and Germany had great weeks.<\/p>\n Government bonds were largely down on the \u2018risk-on\u2019 week, while corporate and other spread products were positive.\u00a0 Foreign bonds were mixed.<\/p>\n Commodities were led by precious metals (presumably on the EU \u2018confidence\u2019 vote and implied monetary stimulus to come in Europe and the U.S.), while grain contracts pulled back.<\/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.\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":" Economic news on the U.S. front was mixed this week, although signs of a slowdown continue to persist. Firstly, the advance estimate of the 2nd Quarter U.S. GDP came out at a +1.5% annualized rate.\u00a0 Believe it or not, this was largely in line with consensus expectations (lower than some, higher than some others fromRead 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-895","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/895","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=895"}],"version-history":[{"count":1,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/895\/revisions"}],"predecessor-version":[{"id":896,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/895\/revisions\/896"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=895"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=895"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=895"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n\n
\n Period ending 7\/27\/2012<\/strong><\/td>\n \n \n \n DJIA<\/td>\n \n \n \n S&P 500<\/td>\n \n \n \n Russell 2000<\/td>\n \n \n \n MSCI-EAFE<\/td>\n \n \n \n MSCI-EM<\/td>\n \n \n \n BarCap U.S. Aggregate<\/td>\n \n \n \n\n
\n U.S. Treasury Yields<\/strong><\/td>\n \n \n \n \n \n \n 12\/31\/2011<\/td>\n \n \n \n \n \n \n 7\/20\/2012<\/td>\n \n \n \n \n \n \n 7\/27\/2012<\/td>\n \n \n \n \n \n