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Stock Market Scoop - July

For the month of July, the Dow Jones Industrial Average was the clear leader among US indexes in July, adding over 1100 points, a gain of 4.7%, while the Nasdaq added 2.2%.  By market cap, the large cap S&P 500 added 3.6% in July, while mid-caps and small caps lagged, each rising a lesser 1.7%.  International markets were generally higher in July, as well.  Canada rose 1%, the UK added 1.5%, France's CAC 40 gained 3.5%, Germany's DAX rose 4%, and Italy's Milan FTSE finished up 2.7%.  Asian markets were weaker than their European counterparts, but still positive.  China's Shanghai Composite managed a 1% gain, while Japan's Nikkei added 1.1%.  As grouped by Morgan Stanley Capital International, developed markets added 2.9% and emerging markets rose 3.5%.  Commodities, on the other hand, had a tough month.  Oil was off -6.6% for the month, Gold retreated -1.6%,  Silver fell a deeper -3.6%, and Copper brought up the rear among metals by finishing July down -4.6%.

Initial claims for new unemployment benefits inched up by 1,000 to 218,000 last week remaining below economists’ forecasts of a 220,000 reading.  Claims haven’t been this low since the early 1970’s.  The less volatile monthly average of new claims dropped by 3,500 to 214,500—its second lowest reading in the past nine years.  Healthy consumer spending and business investment helped propel the economy to a 4.1% rate of growth in the spring.  The strong growth has led to more hiring and knocked unemployment down to its lowest level in 18 years.  The number of people already collecting unemployment benefits, known as “continuing claims”, declined by 23,000 to 1.72 million.  That number is almost a quarter of a million lower compared to the same time last year.

Pending home sales, which measures the number of real-estate transactions in which a contract has been signed but hasn’t yet closed, ticked up 0.9% in June, the National Association of Realtors (NAR) reported.  However, of concern is that June’s number was lower than year-ago levels for the sixth month in a row, this time by 2.5%.  Economists’ had forecast a 0.8% increase for the month.  Analysts note that the housing market appears to be in a continuous state of demand overwhelming supply, which limits sales.  Still, June marked the first inventory increase in three years and that most likely helped pending-home sales, said the NAR.  All four regions reported increases in pending home sales for June.  The Northeast jumped 1.4%, the Midwest added 0.5%, the South gained 1.1%, and the West rose 0.7%.

Going into August, our indicators all remain positive. In the big picture timeframe, the U.S. Bull-Bear Indicator is in Cyclical Bull Territory at 72.59 (45 indicates bear market). Our shorter-term indicator turned positive on April 3rd and has remained positive since. The indicator ended last week at 24, down from the previous week’s 25. Separately, the intermediate-term Quarterly Indicator – based on domestic and international stock trend status at the start of each quarter – was positive entering July, indicating positive prospects for equities in the third quarter of 2018.

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