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Clarksville, TN – The economic data were mixed. New home sales were much weaker than expected in June, with a sharp downward revision to May (March and April figures were also revised lower) – however, these figures are reported with an enormous level of uncertainty.
Existing home sales improved, with a further increase in the number of homes for sale. Durable goods orders rose moderately, but details showed a lackluster trend in shipments of nondefense capital goods. The Consumer Price Index rose 0.3% (+2.1% y/y), inflated partly by the seasonal adjustment for gasoline (which rose 0.3% before adjustment and +3.3% after adjustment). Ex-food & energy, the CPI edged up 0.1% (+2.0% y/y).Financial markets did not react much to the economic figures or to geopolitical developments. Instead, the markets appeared to be skittish, looking for direction.
Next week, the economic calendar is extremely busy. Oddly, Wednesday’s Fed policy decision is likely to be the least interesting. It’s widely expected that the Federal Open Market Committee will taper the monthly pace of asset purchases by another $10 billion (to $25 billion), on track to end the program after the policy meeting in late October.
Fed officials are unlikely to provide any new clues as to when short-term interest rates will begin to rise. There’s always a lot of uncertainty in the advance GDP estimate. The government doesn’t have a complete picture and will have to make assumptions about foreign trade, inventories, and a number of other components. Consumer spending and business fixed investment should be moderate.
A faster pace of inventories should add to GDP growth, while a wider trade deficit will subtract. Adding to the uncertainty, the government will also release annual benchmark revisions to the GDP figures for the last few years. The Employment Report is likely to be moderately strong. Note that seasonal adjustment can be tricky in July (hence, a good chance for a surprise).
Consumer Money Rates
Treasury Yield Curve – 7/25/2014
S&P Sector Performance (YTD) – 7/25/2014
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business July 24th, 2014.
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