As you read this report you will notice the majority of the information centers around the U.S. Market, however I think the information is quite timely, so I thought I would share it with you! Canada’s health is heavily correlated to the U.S.!
Another Week, Another Record High
U.S. equity investors witnessed the stock market reach yet another milestone last week as the S&P 500 finished at 1680.19, its highest close ever according to CNBC. The S&P 500 index continued to add to the already outstanding gains established so far this year by gaining 2.96 percent last week bringing the cumulative year-to-date gain up to 17.81 percent. The strong gains may have been aided by the release of meeting minutes from the previous Federal Reserve member meeting. Some investors believe the minutes indicated the inevitable tapering of Fed asset purchases could be further off into the future than what was assumed following Ben Bernanke’s last press conference. It was at this press conference where Bernanke announced the Federal Reserve is predicting there will be enough economic improvement to warrant a conclusion of the Fed’s current asset purchasing program by sometime next year, assuming their estimates on economic growth and employment hold true. Investors may turn their attention back to corporate earnings for the foreseeable future as they prepare for the next batch of quarterly reports which will give more indication on the health of corporate America.
Source: Yahoo! Finance
Fed Minutes Indicate Support Will Remain
Minutes from the June 18-19 Federal Reserve policy meeting were released last week offering further clues on the future of monetary policy. According to the official release of the minutes, most Fed officials feel even more improvement in the employment market and overall economy is necessary before asset purchases should begin to slow. In a speech to the National Bureau of Economic Research following the release, Ben Bernanke stated unemployment remains high and increased taxes and federal spending cuts are still dragging on economic growth. According to Yahoo! Finance, Bernanke was quoted as saying, “A highly accommodative monetary policy for the foreseeable future is what is needed for the U.S. economy.” The minutes also showed there is division among the members in regards to the timing of slowing down the current asset purchasing program. According to the minutes, many Fed officials remain convinced the asset purchasing program should extend into 2014. According to Michael Hanson, U.S. economist at Bank of America Merrill Lynch, tapering of asset purchases in September, “is not quite a done deal.”
Earnings Season Begins
Once every three months corporations update their investors on the performance of their operations and, perhaps more importantly, offer a future outlook of their business and the overall economy. As we enter into 2013’s second quarter of earnings reports, consensus expectations from analysts on Wall Street aren’t very high. According to FactSet, the earnings per share for the companies which make up the S&P 500 are only expected to grow at an average rate of 0.8 percent from last year. Furthermore, revenue is only expected to have grown 1 percent on average. While the second quarter is obviously already behind us, investors will be keying on what corporate managers have to say about the outlook for the remainder of 2013.
Mortgage Applications Decline
A recovering housing market has given market experts reason to be optimistic about the health of the U.S. consumer, however, rising interest rates are threatening to put a damper on the recent momentum. For the second consecutive week, the Mortgage Bankers Association’s seasonally adjusted gauge of loan requests for home purchases declined, this time by 3.1 percent. Meanwhile, this drop in home buying interest has occurred as mortgage rates rose for the ninth consecutive week and are now averaging 4.51 percent which is the highest rate in two years according to USA Today. Although interest rates remain near all-time record lows, the recent rise in interest rates has at least temporarily resulted in weaker mortgage applications.