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Weekly Update – July 19, 2019

  • U.S. stocks ended the week on a softer note after the Federal Reserve downplayed the chances of a larger rate cut at its July meeting. The Dow ended the week at 27265, slightly off its week-ago, all-time high of 27332. The S&P 500 and Nasdaq closed at 2,976.61 and 8,146.49, respectively, both slightly lower. With stocks easing and the prospects of a rate cut looming, yields on two-year and ten-year Treasurys eased to 1.813% and 2.048%, respectively for the week. Oil prices edged high on Friday on U.S.-Iranian tensions, but still finished the week lower overall at $55.63 on oversupply concerns.
  • With nearly 16% of S&P 500 companies reporting second-quarter results, 77% have exceeded earnings per share (EPS) expectations, while 64.6% have beaten revenue expectations. As of July 19, 2019, Refinitiv estimated the S&P 500 index’s first-quarter earnings growth rate at 1% and its 12-month forward P/E ratio at 17.2. Citi, IBM and Microsoft impressed this week, whereas CSX, Netflix and American Express disappointed.
  • While Fed officials indicated readiness to cut the overnight fed funds rate by 25 basis points (bp), as well as additional cuts going forward, they do not believe a larger cut is necessary at this time. While the Fed has expressed general concerns about a slowdown in global growth, ongoing trade-policy uncertainty and a pullback in inflation, the prospects for a larger, or 50 bp cut were dashed following data earlier in the month showing inflation may not be as weak as feared.
  • Housing starts fell 0.9% in June from May to an annual rate of 1.253 million. Residential building permits dropped 6.1% during the month to an annual rate of 1.220 million, the largest monthly drop since March 2016.
  • Initial jobless claims rose by 8,000, coming in at 216,000 for the week ending July 13, a jump from the prior week’s 208,000. Meanwhile, continuing claims decreased by 42,000 to 1,686,000 in the week ended July 6.
  • The University of Michigan’s consumer sentiment increased to 98.4 in July, slightly higher than June’s 98.2 final reading.

CPWM Weekly Market Monitor (2019.07.19)

 

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