Mixed Results for Holiday Week

For the week of Monday, July 2, 2012 through Friday, July 6, 2012

• Standard & Poor’s 500 Index: -0.55%
• Dow Jones Industrial Average:-0.84 %
• NASDAQ Composite: 0.08%

Despite coming off the best June seen in a decade, the markets ended the holiday-shortened week mixed. Monday the economy weighed heavy on the markets after reports showed the U.S. Manufacturing sector contracted in June. Stocks rose before the July 4th holiday only to fall again on Friday on a less than stellar jobs report.

The European Central Bank acknowledged that the economic picture across Europe was worse than it had let on. The central bank cut the main refinancing rate to 0.75% and the overnight deposit rate to zero.

Economic Data

• ISM Manufacturing Index:
  • The June ISM Manufacturing Index had a surprising fall of 3.8 points to 49.7
    • This is its first sub-50 reading of the recovery.
    • Both new orders and new export orders came in below 50, making the future outlook weak.
    • The positives were the employment index and the inventory measures.
  • With little change in employment and no overbuilding of stockpiles, there is not an imminent concern.
  • Overall, the results paint a more downbeat picture of the industrial sector, which is limping into the second half of the year.
• Chain Store Sales Snapshot:
  • The International Council of Shopping Centers’ Chain Store Sales Index rose 0.2% in the latest week.
    • The gain paled compared to the increase in the comparable week last year.
    • However, year-over-year growth tumbled to 1.4%, the worst performance since January 2011.
    • The ICSC blamed the weakness on severe storms that hit portions of the Midwest and Middle Atlantic.
  • Despite the positive reading and continued support of lower gasoline prices, the ICSC further reduced their forecast for sales for the month.
• Factory Orders:
  • Factory orders showed positives as orders for manufactured goods grew 0.7% in May.
    • This was just above expectations.
    • Figures for growth in durable goods orders were revised up to 1.3%.
    • Shipments of durable goods were revised upward to 0.8%, a 0.1% increase, and unfilled orders were unchanged.
    • Inventories fell 0.2%.
    • Core capital goods orders were revised up to a 2.1% increase, and shipments rose 0.6%.
• MBA Mortgage Applications Survey:
  • The mortgage applications composite index fell 6.7% in the week ending June 29.
  • The result of another decline in refinance applications as the refinance index dropped 8.4%.
  • The purchase index gained 0.6%, a reversal from the previous week.
• Employment:
  • Jobless claims reached their lowest levels since mid-May, declining more than expected in the latest week.
    • The improvement is an encouraging sign for a labor market that has been struggling to find firmer footing, but is not yet an all-clear for the near-term outlook.
    • Initial claims decreased by 14,000 to 374,000 for the week ending June 30.
    • The prior week’s data were revised from 386,000 to 388,000.
    • Continuing claims edged higher in the prior week.
  • The Bureau of Labor Statistics reported U.S. employers added 80,000 jobs in June.
    • This was only slightly better than the 77,000 added in May.
    • The U.S. unemployment rate remained at 8.2%.
• ISM Services Index:
  • The ISM nonmanufacturing index fell from 53.7 to 52.1 in June.
  • The decline was more than expected, putting the index at its lowest since January 2010.
  • New orders, business activity and export orders all fell.

Interest Rates

• Yields on Treasury 10-year and 30-year debt declined the most in a week after the ISM Manufacturing Index report showed U.S. manufacturing unexpectedly declined in June, spurring concern the economic recovery is faltering.
  • The two-year Treasury rate fell by one basis point in the latest week.
  • The five-year Treasury rate also fell one basis point to 0.29%.
  • The 10-year Treasury rate rose nearly four basis points to 1.61%.
  • The 30-year Treasury yield gained six basis points climbing to 2.74%, but still trades well below its 2012 average of 3.03%.

Disclosures

This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.