Angelo Taningco
Economist, Treasury Group
US equity markets were in negative territory at the start of the week as Monday saw the Dow, S&P 500, and NASDAQ down by 0.57%, 0.58%, and 1.39%, respectively. This was unlike last week when the Dow and S&P 500 were up 1.6% and 0.6% w-o-w, respectively. Meanwhile, NASDAQ incurred a sharp 1.1% w-o-w drop last week and extended its losing streak yesterday. Tech stocks have been performing poorly since last week amid investor concerns that they are overvalued and since Facebook released its disappointing Q2 user growth and earnings. As a result, the FANG index dropped amid declines in Amazon, Google, Facebook, and Netflix stocks.
Last Friday saw the release of US Q2 GDP, which posted an annualized 4.1% growth, much better than its Q1 revised rate of 2.2% but slightly lower than the market consensus of 4.2%. Also, last week highlighted a poor performance by the housing sector in June on the basis of monthly contractions in new and existing home sales and slower-than-expected growth in June durable goods orders.
This week is seen to release a number of US economic data: these include personal income and spending, PCE inflation, employment cost index, ISM manufacturing, factory orders, nonfarm payroll employment (NFP), unemployment, and average hourly earnings growth. Overall, we expect personal income and spending to grow steadily in June; PCE inflation and wage growth to be flat and again lacking acceleration; ISM manufacturing and factory orders data to portray moderate industrial growth; and NFP and unemployment data to exhibit solid labor market. The FOMC will also conduct its monetary policy meeting on 31 July – 1 Aug., and we expect it to keep unchanged the target range of its policy rate, and to provide guidance on the path of its gradual rate hikes.
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