Last week, markets kept relatively quiet despite the continuing drop in oil prices. The S&P 500 rose by 0.21%; the Dow increased by 0.05%; and the NASDAQ -- the week's best performer -- jumped 1.84%.[1] Internationally, the MSCI EAFE fell by 0.20%.[2] Asian markets remained relatively mixed while European markets were down modestly.[3] 

A global glut of oil has led to 5-straight weeks of price declines. OPEC's attempts to curb oil production have not yet played out as expected, as prices are down roughly 20% for the year. Though oil rose slightly on Friday due to a weaker U.S. dollar, oil markets closed the week at a 10-month low.[4] Still, oil stocks and energy companies in general comprise less than 6% of stocks in the S&P 500 on a capitalization basis, down from 11% only 3 years ago. As such, they are less significant to the overall markets today than in the past.[5] 

What We Learned Last Week

Despite oil's problems, a few economic indicators for the week pointed to the potential for mildly stronger Q2 consumer spending.[6]

  • Existing Home Sales Rebound: Overall, existing home sales for May rebounded with a 1.1% increase from April to an annualized rate of 5.62 million sales. Single-family sales rose 1.0% for an annualized rate of 4.98 million, while condos sales rose by 1.6% for an annualized rate of 640,000.[7]
  • New Home Sales and Pricing Surge: New home sales for May rose 2.9% to a 610,000 annualized rate on strong pricing. Median house pricing jumped to $345,800, an 11.5% rise for the month. The 16.8% year-on-year increase is roughly double the actual sales gain of 8.9%.[8]
  • Low Jobless Rate Stays Steady: June jobless numbers have so far remained on track and consistent with the current historic lows. Last week's data revealed that the 241,000 claims matched general consensus.[9]
  • Flash Purchasing Managers' Index (PMI) Slows: The PMI flash composite index came in at 53.0 for the month versus 53.9 for the prior month. Though new orders and employment in the service sector appear optimistic, manufacturing's new orders and output have fallen. The single index is a synthesis of data such as new sales orders, inventories, and employment. A reading above 50 indicates rising output versus the previous month.[10]

What Is Next?

With Q2 ending this week, markets will look at the durable goods orders, additional home sales data, and consumer sentiment, while continuing to watch oil prices.[11] In addition, the second part of the Fed stress test for banks will report on Wednesday. The second half of the stress tests evaluates banks' abilities to pay dividends and buy back stock. All 34 major banks passed the first part of the test last week, indicating their strength in an economic downturn.[12]  

If you have any questions about this content or your financial future, we welcome you to contact us. Our team is here to provide the perspectives you need for the road ahead.

ECONOMIC CALENDAR

  • Monday: Durable Goods Orders
  • Tuesday: Case Shiller Home Prices Index, Consumer Confidence Index
  • Wednesday: Pending Home Sales
  • Friday: Personal Income and Outlays, Consumer Sentiment

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies. 

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia. 

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

The Federal Reserve System (also known as the Federal Reserve and, informally, as the Fed) is the central banking system of the United States. The Federal Reserve System is composed of 12 regional Reserve banks which supervise state member banks. The Federal Reserve System controls the Federal Funds Rate (aka Fed Funds Rate), an important benchmark in financial markets used to influence the supply of money in the U.S. economy.

In accordance with its Statute, the mission of the Organization of the Petroleum Exporting Countries (OPEC) is to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US 
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO 

[2] https://www.msci.com/end-of-day-data-search 

[3] http://www.cnbc.com/2017/06/22/asia-markets-oil-prices-china-regulators-in-focus.html 

http://www.cnbc.com/2017/06/23/european-stocks-eye-european-politics-eu-summit-brexit-oil-data.html

[4] http://www.cnbc.com/2017/06/22/oil-edges-up-but-set-for-worst-h1-performance-in-20-years.html 

[5] https://www.bloomberg.com/news/articles/2017-06-23/this-time-it-is-different-stocks-are-ignoring-oil-s-bear-market 

[6] http://wsj-us.econoday.com/byshoweventfull.asp?fid=475714&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[7] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477937&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[8] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477961&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top 

[9] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477451&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top 

[10] http://wsj-us.econoday.com/byshoweventfull.asp?fid=480008&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top 

[11] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=482097&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top 

[12] http://www.cnbc.com/2017/06/22/big-banks-make-it-through-stress-tests-investors-await-cash-release.html