US Economy and Credit Markets Ended July 20, 2018

Bob Carey
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US Economy and Credit Markets Ended July 20, 2018

Posted Under: Weekly Market Commentary

Bond investors did not lack for news last week as Federal Reserve Chairman Jerome Powell delivered a positive assessment of the economy to Congress and outlined the Federal Reserve's intention to continue its path of gradual rate increases. However, much of the last week media coverage last week focused on President Trump's remarks that rising yields will put a damper on the economic growth being currently enjoyed. There is much less being said about TINA (there is no alternative) recently and it's no surprise as the three-month T-bill yield is currently higher than the indicated dividend yield on the S&P 500. Of concern to investors though, is the lack of response on the long-end of the curve to increasing short-term rates. On Monday, the retail sales report supported the narrative that consumers are enjoying a strong job market and improved spending power. Retail sales rose half a percent for June, matching estimates. Also last week, Industrial Production was shown rising 0.6%, beating expectations, in June after disappointing in May. Disappointing investors was Wednesday's Housing Starts data which recorded a 12.3% decline for June significantly underperforming expectations and generating increased concerns that rising interest rates may slow housing starts. Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Monday: June Existing Home Sales (5.44m, 5.43m); Tuesday: July preliminary Markit US Manufacturing PMI (55.1, 55.4); Wednesday: July 20 MBA Mortgage Applications (N/A, -2.5%); Thursday: July 21 Initial Jobless Claims (215k, 207k), June preliminary Wholesale Inventories (0.4%, 0.6%) and June preliminary Durable Goods Orders (3.0%, -0.4%); Friday: 2Q annualized QoQ GDP (4.2%, 2.0%) and July final University of Michigan Sentiment (97.1, unch.).

Posted on Monday, July 23, 2018 @ 8:40 AM • Post Link	Share:
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

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