Markets Mixed With Earnings Season Underway; Bonds Flat While Munis Rise

The Dow (+2.1%), NASDAQ (-0.6%) and S&P 500 (+0.7%) were mixed for the week.  Meanwhile, taxable bonds were flat, but tax-free municipal bonds gained about 0.5%.  The 10-year Treasury yield advanced a modest 0.03% to finish the week at 3.85%.  The inverted yield curve (the difference between the 2-year and 10-year Treasuries) rose back to 1.0%.  The dollar also increased last week, pushing the values of international stocks down fractionally.

Earnings season is fully underway with the major bank stocks reporting mixed earnings over the past 1+ week.  More notably, two of the top-name tech stocks (Tesla and Netflix) reported weaker than expected earnings, which caused a sharp decline in those stocks and the tech-heavy NASDAQ.  The Leading Economic Indicators (LEIs – my favorite gauge of the economy) fell 0.7% from the prior month, marking the 15th consecutive monthly decline.  In other economic news, housing starts and building permits also exhibited a big drop in June.  Core retail sales bucked these trends, as they increased 0.6% over the prior month, but that excludes inflation.  In the end, there are significant signs of weakness in the economy, except that the consumer seemingly remains resilient and is keeping the US economic engine forging ahead.

All eyes will be on the Fed this week, as they are expected to raise interest rates again on Wednesday by 0.25%.  However, it’s not what the Fed does, but what it says in its press conference afterward, as investors will be seeking to hear if the Fed is leaning toward or against raising rates at its next meeting in September.  So long as the Fed does not surprise anyone with their language, then all eyes will be back on corporate earnings reports.

^{Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.}

^{The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.}