Economic Update 08/11/14

U.S. SERVICE SECTOR IS BOOMING

The Institute for Supply Management’s July non-manufacturing PMI came in at a stellar 58.7, indicating rapid expansion. It hadn’t been that high since December 2005, and its new orders sub-index reached a peak unseen since August 2005. On Wall Street, some investors worried that the Federal Reserve would take the news as additional grounds for raising short-term interest rates – but in the big picture, it expresses the strength of the recovery. ISM’s service sector PMI had a reading of 56.0 in June.

FACTORY ORDERS RISE 1.1%

June’s gain far outshined the 0.5% increase forecast by analysts surveyed by Briefing.com. This was a nice comeback for the indicator after the (revised) 0.6% decline in orders that the Census Bureau recorded for May.

HEADLINES BOOST GOLD PRICES; OIL PULLS BACK

Geopolitical risk in Eastern Europe and the Middle East meant more interest in the yellow metal last week as investors sought a place to park some cash. In New York, gold settled at $1,310.60 per ounce Friday, up 1.35% for the week. NYMEX crude actually lost 0.28% for the week, settling Friday at $97.35.

FRIDAY RALLY TURNS DOWN WEEK AROUND

Reports that Russian troops were no longer conducting maneuvers near Ukraine’s border helped the S&P 500 climb 1.15% Friday. The broad benchmark gained 0.33% across 5 days, closing the week at 1,931.59. Minor weekly gains also came for the Nasdaq (0.42% to 4,370.90) and the Dow (0.37% to 16,553.93).

THIS WEEK: Earnings season rolls on Monday as American Apparel, Aramark, Priceline.com, Tata Motors, Procter & Gamble and Sysco report quarterly results. Tuesday, the Street considers earnings from Prudential, Fossil, La Quinta Holdings, LoJack and Towers Watson. On Wednesday, reports on July retail sales and June business inventories complement earnings from Cisco, NetApp, Deere, Macy’s, Pinnacle Foods, RE/MAX and Silver Wheaton. In addition to the week’s report on initial jobless claims, Thursday brings earnings reports from Wal-Mart, Lenovo, Nordstrom, JC Penney, Red Robin, Applied Materials, Houghton Mifflin and Autodesk. Friday, the July PPI and July industrial output report appear along with Q2 results from Estee Lauder.