Stocks rebounded from last week’s swoon on Monday, with the S&P 500 rising 0.7% and small-cap indexes gaining 0.9%. While stock prices are still marginally lower than at midyear, today’s rebound did recapture last Friday’s retreat and then some, led higher by stocks in the energy sector.
The energy sector benefited today from higher crude oil quotes – after a week of declining oil prices – and by a deal struck between Colorado Governor John Hickenlooper and U.S. Representative Jared Polis to keep November’s elections free of resolutions increasing local control of fracking. Forty of 45 stocks in the S&P 500 energy sector had gains on the day, led by oil producers like Noble Energy (+5.2%) and Anadarko Petroleum (+4.8%).
Nine of the 10 S&P 500 market sectors had gains Monday, with utilities (-0.6%) the lone sector in negative territory. Today’s market action was pro-cyclical in other respects as well, with consumer discretionary stocks (+1.0%) and materials (+1.1%) following the energy sector’s (+1.6%) lead. Volatility receded from last week’s high of 17 on the VIX scale to around 15 Monday. Outside of utilities and energy stocks, trading volume was a bit on the light side Monday.
Much as in the month of July, European stock markets were lower Monday, while Asian shares were generally higher. European bourses were higher earlier in the trading day but ended modestly lower on average, with the exception of France’s CAC 40, which rose 0.3%; Frankfort fell 0.6% to the lowest level on the DAX since mid-March. In Asia, despite middling declines in Japan and Australia, the Asia Dow rose 0.2%, as Chinese and Indian indexes rose 1% to 2%. The HSBC service sector and composite PMIs are expected to be reported later today.
Bond prices were up a tad on Monday, except for TIPS, which saw some upward movement in yields, especially at the long end of the curve. The 30-year nominal Treasury bond was off roughly one-eighth of a point; the 30-year TIPS declined over one-half point. High-yield bonds rebounded modestly, getting back a small fraction of last week’s losses, perhaps on Portugal’s €4.4 billion reported rescue of Banco Espirito Santo. The “good” bank that will emerge from the bailout is to be named Novo Banco, Reuters reported.
The Federal Reserve Bank of Atlanta continues to churn out interesting charts. On Friday, macroblog published a chart detailing the June Swoon in Housing. Today’s New York Times The Upshot blog posted the following chart, detailing housing’s outsize role in the U.S. output gap – i.e., how much GDP is running below potential. Combined, the two blogs suggest that the expected rise in interest rates will be slow in coming.
Reports/dates/facts/links to watch for over the next week:
- August 5: Factory orders (June); ISM non-manufacturing index (July).
- August 6: U.S. foreign trade deficit (June).
- August 7: Weekly unemployment claims; consumer credit (June); BOE and ECB monetary policy announcements.
- August 8: U.S. productivity and unit labor costs for Q2;
- The Atlanta Fed’s new GDP forecasting model: GDPNow
Copyright © 2014 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.