FED DELIVERS EXPECTED & UNEXPECTED NEWS
As Wall Street anticipated, the Federal Reserve raised interest rates on June 14. The Federal Open Market Committee voted 8-1 to take the benchmark interest rate north by a quarter-point to the 1.00-1.25% range. The Fed also said it would begin to reduce its $4.5 trillion balance sheet at some point “this year” by slowing reinvestments. As a start, it will let $6 billion per month in Treasury holdings run off, along with $4 billion per month in agency debt and mortgage-linked securities. This implies upward pressure on long-term interest rates.1,2
RETAIL SALES, HEADLINE INFLATION BOTH RETREAT
The Consumer Price Index declined 0.1% in May, noted the Bureau of Labor Statistics; core consumer inflation rose 0.1%. A bigger May decline came for retail purchases – the Census Bureau said that they fell 0.3% even with car sales factored out.3
HOUSING STARTS SLIP
The Census Bureau’s new residential construction snapshot showed groundbreaking at an 8-month low, with total housing starts down 5.5% in May. Total building permits decelerated 4.9% last month to their slowest pace since April 2016.4
GAUGE OF SENTIMENT DESCENDS
In its preliminary June edition, the University of Michigan’s consumer sentiment index fell short of expectations. Economists, polled by Briefing.com, forecast a reading of 97.0 for the index, but it came in at 94.5.3
DOW 30 OUTPACES S&P 500
Rising 0.53% in five days, the Dow Jones Industrial Average ended the week at 21,384.28. The S&P 500 made a weekly advance of 0.06% to a Friday close of 2,433.15. Tech shares kept selling off, resulting in the Nasdaq Composite’s 0.90% weekly descent to a Friday settlement of 6,151.76. The Dow Jones Utility Average had the best week among consequential U.S. equity indices, rising 1.75%.5
THIS WEEK: Nothing major is scheduled for Monday. Tuesday, Adobe Systems, FedEx, La-Z-Boy, Lennar, and Red Hat all present earnings. Wednesday offers May existing home sales figures and earnings announcements from CarMax, Oracle, and Winnebago. Earnings news from Accenture, Barnes & Noble, Bed Bath & Beyond, Carnival, and Sonic arrives Thursday, plus new initial jobless claims numbers. Friday, investors consider May new home sales and Q2 results from Finish Line.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +8.21 +20.59 +13.50 +5.68
NASDAQ +14.28 +26.97 +22.83 +13.42
S&P 500 +8.68 +17.09 +16.24 +5.87
REAL YIELD 6/16 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.49% 0.15% -0.54% 2.73%
Sources: wsj.com, bigcharts.com, treasury.gov – 6/16/175,6,7,8
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
WEEKLY QUOTE
“We learn by example and by direct experience because there are real limits to the adequacy of verbal instruction.”
– Malcolm Gladwell
WEEKLY TIP
Do you have a child heading off to college this fall? Financially, it may be time for his or her first credit card. One idea: have your son or daughter sign up for a basic, low-limit card through a credit union or independent bank and have the monthly statements sent to you.
WEEKLY RIDDLE
What are you able to keep after you give it to someone?
Last week’s riddle:
I often stand straight and tall. I can illuminate your wall or hall. If you push me, I may fall. What am I?
Last week’s answer:
A candle.
Citations.
1 – marketwatch.com/story/fed-raises-interest-rates-to-reduce-balance-sheet-this-year-2017-06-14 [6/14/17]
2 – businessinsider.com/federal-reserve-rate-hike-plan-to-unwind-45-trillion-balance-sheet-2017-6 [6/14/17]
3 – briefing.com/investor/calendars/economic/2017/06/12-16 [6/16/17]
4 – reuters.com/article/us-usa-economy-idUSKBN197277 [6/16/17]
5 – markets.wsj.com/us [6/16/17]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F16%2F16&x=0&y=0 [6/16/17]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F16%2F16&x=0&y=0 [6/16/17]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F16%2F16&x=0&y=0 [6/16/17]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F15%2F12&x=0&y=0 [6/16/17]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F15%2F12&x=0&y=0 [6/16/17]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F15%2F12&x=0&y=0 [6/16/17]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F15%2F07&x=0&y=0 [6/16/17]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F15%2F07&x=0&y=0 [6/16/17]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F15%2F07&x=0&y=0 [6/16/17]
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [6/16/17]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [6/16/17]
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by MarketingLibrary.Net Inc., for Mark Lund, Mark is known as a Wealth Advisor, The 401k Advisor, Investor Coach, The Financial Advisor, The Financial Planner and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. an independent, fee-only, Registered Investment Advisor firm providing investment and retirement planning for individuals and 401k consulting for small businesses. Stonecreek is located in Salt Lake City, Murray City, West Jordan City, Sandy City, Draper City, South Jordan City, Provo City, Orem City, Lehi City, Highland City, Alpine City, and American Fork City in Utah.
