Another week of economic performance brought more news that the markets continue their bullish streak.
After eight consecutive record-high closings, the Dow rose above 22,000 for the first time ever
and
finished the week up 1.20%.
The S&P 500 was up 0.19% for the week
,
and the NASDAQ
slightly
fell
by
0.36%.
Meanwhile, t
he MSCI EAFE closed with a 0.82% increase.
The positive news continued with other upbeat reports
. Manufacturing and employment
each
posted impressive numbers
,
suggesting a favorable Q3 start.
And investors are looking ahead to possible Fed action on unwinding its balance sheet and bumping interest rates up again in December.
Here are key market developments that emerged last week:
Manufacturing
Is
On the Rise
M
anufacturing is
gaining speed
as a key
economic factor for Q3 and Q4
In June, n
ew factory orders rose to
almost
a 10% annual increase, the best rate in the last
3
years.
Unfilled orders also jumped
1.3%
on rising demand for transportatio
n equipment and capital goods.
In addition, business confidence is
at a 6-month high and
inventories
are up
, though inflationary pressure remains soft.
As a result, factory payrolls jumped 16,000 in July on top of
June's
12,000 increase.
Jobs Reports
Remain Robust
Last Friday's
Employment Situation
report marks the 5th time this year
that payroll growth
surpassed 200,000.
While analysts predicted
payrolls would grow by
an additional 178,000, the actual number came in at 209,000.
The solid employment increase helped lower the unemployment rate to 4.3%
-the best rate since 2001
.
Average hourly earnings
also
rose last week. The welcomed 0.34% increase on the month was the highest increase since October. Analysts hoped that low unemployment numbers would push yearly wage growth to over 3%, but year-to-date numbers continue to hover around growth of 2.5%.
Fed
eral Reserve Weighs Options
Expect t
he Fed to raise interest rates
in December
by
an additional
¼
point, though
Fed Chair
Janet Yellen
has indicated that low inflation remains a concern for the economy. Despite robust financial markets, low unemployment, and a flourishing job market, inflation
sits
below the targeted 2% increase, with modest
increases in both
wage growth and consumer spending.
Some analysts think that soft
inflation
could
give pause to a year-end Fed rate hike.
Many observers believe the Federal Reserve will begin in September to
shrink
its $4.5 trillion balance sheet.
The Fed balance sheet consists primarily of U.S. treasury bonds and mortgage-backed securities. To reduce this position, the Fed can either sell those securities, or it can opt not to reinvest securities as
they
mature.
What
I
s Ahead
Domestically
Widespread positive indicators are at the heart of a solid start to Q3. In addition to rebounding manufacturing activity and robust employment data, other aspects of the economy are
brightening
:
- Solid Q2 corporate earnings continue to impress the markets.
- Consumer sentiment is exceptionally high on the economy, personal finances, and individual companies.
- Pending home sales are on the rise and suggest optimism for July and August existing home sales numbers.
- Auto sales provide an early indicator of a minor and needed boost in consumer spending, as unit sales moved higher in July and may continue.
Internationally
In addition, economies
around the world are
moving in the right direction.
The euro economies are showing continued strength
, while
emerging economies are expanding at their fastest rate since 2014.
As always,
we encourage you to continue focusing on your long-term goals. Should you have any
questions about
the economy or your financial life, we are here for the conversation.
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