June 16, 2014 - Markets End Slow Week Lower

| June 16, 2014

Markets snapped their winning streak and ended the week down slightly as investors decided to take some profits off the table. The light economic calendar led to sluggish activity since investors were reluctant to commit to positions without new data to bolster their analysis. For the week, the S&P 500 lost 0.68%, the Dow fell 0.88%, and the Nasdaq slid 0.25%.[1]

Geopolitics took center stage last week when Iraqi insurgents captured Mosul and Tikrit, major cities in northern Iraq, and advanced toward Baghdad. In response to the threat, the U.S. moved a carrier group into the Persian Gulf to support the government in Baghdad. Analysts are worried about how instability in Iraq might affect global oil markets. U.S. crude oil rose to nearly $105/barrel on the new security fears.[2] Iraq is an important Organization of the Petroleum Exporting Countries (OPEC) producer and disruptions in regional supplies could send oil prices through the roof and throttle consumer spending.[3]

In Ukraine, the ongoing conflict escalated when well-armed pro-Russia separatists shot down a Ukrainian military plane. Russia and Ukraine have been caught in a standoff since March, when Russia annexed Crimea. European leaders spoke with Ukrainian and Russian officials about the incident, stressing the need for a cease-fire in eastern Ukraine and a return to stability.[4] EU countries rely on natural gas supplies that pass through Ukraine, and interruptions could cause price spikes and temper much-needed economic growth in Europe.

On the economic front, last week's data was mixed. Weekly jobless claims increased slightly, but the overall trend is still heading in the right direction, giving economists hope that businesses will step up hiring this quarter.[5] However, the latest consumer sentiment numbers show that lower-income Americans are worried about wages and economic growth even as higher-income consumers are staying upbeat about their prospects. This split in attitudes could spell trouble for the economy if low-income Americans become reluctant to spend.[6]

The week ahead is packed with economic events, including the June Federal Open Market Committee (FOMC) meeting, which concludes Wednesday. Analysts don't expect any surprises from the Fed, which has been taking pains to present an image of slow, predictable change in order to avoid spooking investors. However, analysts are hoping for more guidance about future interest rate increases as well as Fed economic projections, which will forecast Gross Domestic Product (GDP), unemployment, and inflation.

ECONOMIC CALENDAR:

Monday: Empire State Mfg. Survey, Treasury International Capital, Industrial Production, Housing Market Index

Tuesday: Consumer Price Index, Housing Starts
Wednesday: EIA Petroleum Status Report, FOMC Meeting Announcement, FOMC Forecasts, Chair Press Conference 2:30pm
Thursday: Jobless Claims, Philadelphia Fed Survey

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

HEADLINES:

Detroit bond settlement reached. Bankruptcy court mediators announced that a settlement had been reached between the City of Detroit and bondholders over the treatment of unsecured general obligation bonds. Although final details have not been released, it is likely that bondholders will receive only a percentage of their principal, though bond insurers may make up some of the difference.[8]

Producer prices fall. The price paid for goods and services by U.S. producers fell for the second straight month, but economists still think inflation is firming up. Producer prices matter because higher prices generally lead to higher inflation as consumers are forced to pay more for goods and services.[9]

Retail sales growth less than expected. Though consumers spent more on retail goods for the fourth straight month in May, sales growth was slower than forecasted. This trend may mean that consumers will be less likely to increase their spending later this year.[10]

Would you pay more in taxes to fix your roads? The brutal winter has taken a toll on roads across America and federal maintenance dollars are coming up short. A recent AAA survey found that two-thirds of respondents would be willing to take a tax hike or pay more at the pump to improve roads.[11]

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

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