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Weekly Update – July 26, 2019

  • U.S. stocks capped the week with new highs following slightly better-than-expected GDP data and strong earnings from key reporters, shrugging off Larry Kudlow cautioning that major “breakthroughs” from next week’s trade talks with China were unlikely. The S&P500 and Nasdaq closed at 3,025.86 and 8,330.21, respectively, both new closing records. The Dow closed up at 27,192.45. With GDP growth and investors positioning for 25 bp rate cut at this week’s FOMC meeting, 10-year U.S. Treasury yields rose on Friday to end the week higher at 2.081%.
  • With nearly 44% of S&P 500 companies reporting second-quarter results, 75.2% have exceeded earnings per share (EPS) expectations, while 60% have beaten revenue expectations. As of July 26, 2019, Refinitiv estimated the S&P 500 index’s second-quarter earnings growth rate at 0.5% and its 12-month forward P/E ratio at 17.3. Starbucks, Twitter and Google (Alphabet) impressed this week, whereas Boeing, Tesla and Amazon disappointed.
  • While the European Central Bank left short term interest rates steady last week, it did prepare the market for a package of easing measures in September, including its first rate cut since 2016, and a restart of its quantitative easing program. The change, while anticipated, represents a significant shift in its monetary policy aimed fortifying the economy from global headwinds and Brexit uncertainty.
  • U.S. gross domestic product increased at a 2.1% annual rate in the second quarter, down 1% from the first quarter. Not surprisingly, second-quarter consumer spending increased a greater-than-expected 4.3%, the strongest personal consumption read in over four years, while government spending also rose at a 5% annualized rate for the period.
  • Headline June durable goods orders increased 2% from May. Meanwhile, core capital-goods orders increased 1.9% for the same period, marking its strongest monthly result since February 2018.
  • New, single-family home sales increased 7% from May to 646,000 (seasonally adjusted, annual). The increase follows declines in April and May.
  • Initial jobless claims decreased by 10,000, coming in at 206,000 for the week ending July 19, a pull-back from the prior week’s 8,000-claim jump. Also, continuing claims decreased by 42,000 to 1,686,000 during the week ended July 6.

CPWM Weekly Market Monitor (2019.07.26)

 

 

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