Woman on the pathThere was a spate of bad news last week, and it drove U.S. markets lower.

China’s wild ride isn’t over yet. The Purchasing Managers’ Index, a private measure of Chinese manufacturing, came in below expectations at 48.2, according to BloombergBusiness. Results below 50 indicate the sector is contracting. That doesn’t bode well for growth in China, which is the biggest global consumer of metals, grains, and energy, or the rest of the world.

Things weren’t rosy in the United States either. Sales of new homes in June came in below expectations, and the median new home price fell from a year ago. That news was a U-turn from recent data indicating strength in the housing market.

Earnings news was also less than stellar. The Standard & Poor’s 500 Index is kind of pricey, according to Reuters, and second quarter earnings for companies in the index were mixed. Seventy-four percent of companies beat earnings expectations but not nearly as many delivered on expected revenues.

Earnings weren’t the only issue on investors’ minds. Last week, the Federal Reserve has signaled a September rate hike was a possibility. This week it inadvertently released a confidential staff forecast that included estimates for inflation, unemployment, economic growth, and the fed funds rate. The Washington Post reported:

“Currently, the fed funds rate is between 0 and 0.25 percent, the same level it has been since the financial crisis hit in 2008… The staff prediction is that the prevailing fed funds rate during the fourth quarter will be 0.35 percent. Though there is no reference to exactly when or how that could happen, analysts say the most likely way is for the central bank to raise its target rate in September.”

Experts cited by Barron’s cautioned, “…it’s not the first rate hike that’s important. It is what comes after that.” Stay tuned.


Data as of 7/24/15

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-2.2%

1.0%

4.6%

15.8%

13.3%

5.4%

Dow Jones Global ex-U.S.

-2.0

1.9

-8.4

8.3

3.5

2.8

10-year Treasury Note (Yield Only)

2.3

NA

2.5

1.4

3.0

4.3

Gold (per ounce)

-4.6

-9.9

-16.4

-12.0

-1.8

9.8

Bloomberg Commodity Index

-4.4

-10.6

-27.7

-13.1

-6.4

-5.0

DJ Equity All REIT Total Return Index

-0.5

-1.9

5.8

10.4

12.7

6.9

S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.  You cannot invest directly in this 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.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

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

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* “Bad News Moves Markets”

Sources:

http://www.bloomberg.com/news/articles/2015-07-24/chinese-factory-gauge-weakens-in-threat-to-economic-recovery

http://www.bloomberg.com/news/articles/2015-07-23/futures-signal-asian-stocks-to-retreat-with-crude-in-bear-market

http://www.bloomberg.com/news/articles/2015-07-24/sales-of-new-homes-in-u-s-unexpectedly-fall-to-seven-month-low

http://www.reuters.com/article/2015/07/24/us-markets-stocks-idUSKCN0PY1AG20150724

http://www.usatoday.com/story/money/2015/06/17/june-federal-reserve-meeting/28834059/

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/24/the-fed-accidentally-released-a-confidential-analysis-of-where-interest-rates-are-going/

http://blogs.barrons.com/stockstowatchtoday/2015/07/24/warning-flags-dow-tumbles-sp-500-slides-as-biotech-crumbles/?mod=BOL_hp_blog_stw

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