Despite a jump in pending home sales, and mostly positive global economic data, U.S. equities finished mixed on the first day of a holiday-shortened week. All U.S. markets will close early on Thursday and remain closed on Friday.
Around the globe, geopolitical concerns continued to brew, while traders may have been treading with some caution ahead of a soon-to-be released global economic data, concluding with the U.S. June nonfarm payroll report and the European Central Bank’s monetary policy decision on Thursday.
Treasuries finished higher, along with gold prices, while the U.S. dollar and crude oil prices were lower.
The Dow Jones Industrial Average fell 26 points (0.2%) to 16,826
The S&P 500 Index declined nearly 1 point (0.1%) to 1,960
The Nasdaq Composite gained 10 points (0.2%) to 4,408
In moderate volume, 737 million shares were traded on the NYSE, and 1.8 billion shares changed hands on the Nasdaq
WTI crude oil moved $0.37 lower to $105.37 per barrel, wholesale gasoline fell $0.03 to $3.04 per gallon
The Bloomberg gold spot price increased $10.72 to $1,326.89 per ounce
Pending home sales top forecasts, regional manufacturing data shows continued growth
Pending home sales rose 6.1% month-over-month in May versus the projected 1.5% rise that economists surveyed by Bloomberg had forecasted, and following the upwardly revised 0.5% increase registered in April. Compared to last year, sales were down 6.9% last month following April’s favorably revised 9.3% decrease. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which rose more than expected in May.
The Chicago Purchasing Managers Index showed growth in Midwest activity decelerated slightly more than expected, decreasing to 62.6 for June, versus expectations of a decline to 63.0, from the unrevised 65.5 in May, but a reading above 50 depicts growth.
The Dallas Fed Manufacturing Index showed growth in activity for the region accelerated more than expected, rising to 11.4 in June from 8.0 in May and compared to the 8.5 figure that was forecasted. Readings above zero denote expansion in activity.
Treasuries finished mostly higher, as the yield on the 2-year note dipped 1 basis point 0.45%, while the yields on the 10-year note and the 30-year bond rate declined 2 bps to 2.52 % and 3.35%, respectively.
Tomorrow will bring the ISM Manufacturing Index, expected to increase slightly to 55.9 in June, from 55.4 in May, remaining in expansion territory as depicted by a reading above 50. Last week the preliminary June Markit U.S. Manufacturing PMI Index gained 1.3 points to 57.5, hitting the highest level since May 2010. The Markit release is independent and differs from the ISM Index in that it has a shorter history and Markit weights its index components differently.
At the halfway point in 2014, we believe the second half of 2014 will show improving growth in the U.S. economy and a continued trend upward in stocks, but stocks could pullback in the near term, as valuations have extended.
Plus, recent risks have included geopolitical tensions in the Middle East, excess investor optimism and the tendency of mid-year corrections during midterm election years.
However, trying to time the market can be treacherous, so we will continue keeping longer-term strategic targets in mind when contemplating making portfolio changes.
We continue to overweight domestic large caps along with sector overweight’s in Industrials, Materials, Healthcare and Energy
Europe and Asia mixed with economic data in focus
The European equity markets diverged, with traders digesting some inflation and retail sales data in the region, kicking off a busy week for the global economic calendar, which will include Thursday’s labor report in the U.S. and the European Central Bank’s monetary policy meeting. The Eurozone consumer price inflation estimate was projected at a 0.5% year-over-year rise for June, matching economists’ expectations and the estimate in May. However, a separate report showed German retail sales rose more than expected in May.
Stocks in Asia also finished mixed ahead of a busy week for the global economic calendar, including tomorrow’s June manufacturing reports out of China and a read on 2Q business sentiment in Japan. Moreover, sentiment remained in check as geopolitical tensions continued to garner attention. In economic news in the region today, Japan’s industrial production rebounded in May from April’s drop, but the rise was below expectations, while a separate report showed small business confidence improved slightly for June.