Weekly Market Highlights

U.S. Equities and Interest Rates Continue to Move in Opposite Directions

  • The Federal Open Market Committee (FOMC) is scheduled to hold its policy meeting on Tuesday and Wednesday
  • Busy week of earnings and domestic economic releases on tap

Last Week's Highlights

  • U.S. Consumer Price Index:  +0.3% in June month-over-month and +2.1% year-over-year (core CPI increased 0.1% month-over-month and 1.9% year-over-year).
  • U.S. Existing Home Sales:  +2.6% to SAAR of 5.04 million units in June.
  • U.S. New Home Sales:  -8.1% to SAAR of 406,000 units in June.
  • U.S. Durable Goods Orders:  +0.7% in June (excluding transportation, durable goods orders increased 0.8%).
  • Oil:  $102.09 ($0.14)
  • Gold:  $1,303.30 ($6.10)
  • U.S. 10-year Treasury:  2.47% (0.01%)
  • Dollar:  Euro--$1.34, Yen--101.83 (strengthened against Euro and Yen)
  • VIX:  12.69 (0.63)

What to Watch for

  • Tuesday 7/29:  Case-Shiller Home Prices
  • Tuesday 7/29:  U.S. Consumer Confidence
  • Tuesday 7/29-7/30:  FOMC Meeting and Policy Decision
  • Wednesday 7/30:  2Q 2014 U.S. GDP (first estimate)
  • Friday 8/1:  U.S. Employment Report
  • Friday 8/1:  U.S. Personal Income and Outlays
  • Friday 8/1:  ISM Manufacturing Index

Domestic financial markets experienced a familiar disconnect last week with the S&P 500 rising to a new all-time high and the U.S. 10-year Treasury yield falling back to its lowest level year to date. Although the S&P 500 has moved gradually higher since the beginning of February, declining interest rates in the first quarter coincided with lower-than-expected economic growth and inflation. More recently, Treasury yields are trading near their lows for the year even in the face of improving U.S. economic data and continued strong performance of risk assets. Foreign inflows into Treasuries and reduced Treasury issuance are providing support for low yields. As we have said previously, however, we would not become accustomed to the current yield environment as we anticipate interest rates gradually moving higher along with an improving labor market. In addition, the Federal Reserve will eventually communicate a change in policy as we near the end of its current asset purchase program, which may introduce further interest rate volatility in the near term.

FOMC Timeline

The FOMC will be meeting on Tuesday and Wednesday but we anticipate very little in the way of news aside from another $10 billion taper, which will bring the Fed’s monthly asset purchases down to $25 billion per month. On its current trajectory, the Fed would wrap up its quantitative easing program in October, but has thus far remained committed to a June 2015 timeframe for raising rates. While recent economic data appears to be displaying an improved growth backdrop, we believe that the heightened geopolitical risks and the possibility of further economic sanctions on Russia are likely to keep Federal Reserve Chair Yellen and company in a wait-and-see mode. The September to December timeframe, in comparison, will be important to monitor for a change in Fed communication.

Economy and Earnings Intersect

This week will be a busy one on the earnings and economic data fronts. With respect to earnings, 144 S&P 500 companies, representing 25% of the index market capitalization, are scheduled to report their financial results—Energy, in particular, will be in focus with two-thirds of the sector reporting this week. Meanwhile, the U.S. employment report (consensus: +225K), ISM Manufacturing Index (consensus: 55.8) and first estimate for 2Q 2014 U.S. GDP (consensus: 2.9%) will headline this week’s economic releases. Despite the ongoing uncertainty in many parts of the world, domestic economic and business fundamentals appear headed in the right direction and we believe this week has the potential to illustrate that trend.

Data Source: FactSet and RIMES

This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger Berman products and services may not be available in all jurisdictions or to all client types.

Investing entails risks, including possible loss of principal. Investments in hedge funds and private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in hedge funds and private equity are intended for sophisticated investors only. Indexes are unmanaged and are not available for direct investment. Past performance is no guarantee of future results.

This material has been issued for use by the following entities; in the U.S. and Canada by Neuberger Berman LLC, a U.S. registered investment advisor and broker-dealer and member FINRA/SIPC; in Europe, Latin America and the Middle East by Neuberger Berman Europe Limited, which is authorised and regulated by the UK Financial Conduct Authority and is registered in England and Wales, Lansdowne House, 57 Berkeley Square, London, W1J 6ER, and is also regulated by the Dubai Financial Services Authority as a Representative Office; in Australia by Neuberger Berman Australia Pty Ltd (ACN 146 033 801, AFS Licence No. 391401), which is licensed and regulated by the Australian Securities and Investments Commission to deal in, and to provide financial product advice for, certain financial products to wholesale clients; in Hong Kong by Neuberger Berman Asia Limited, which is licensed and regulated by the Hong Kong Securities and Futures Commission; in Singapore by Neuberger Berman Singapore Pte. Limited (Company No. 200821844K),which currently carries out the regulated activity of fund management under the Securities and Futures Act (Chapter 289) (“SFA”) and operates as an Exempt Financial Adviser under section 23(1)(d) of the Financial Advisers Act (Chapter 110) (“FAA”) of Singapore. Under the FAA, NB Singapore is exempted from Sections 25, 27 and 36 of the FAA, where its financial advisory service is provided to an accredited or expert investor (as defined in Section 4A of the SFA); in Taiwan to specific professional investors or financial institutions for internal use only by Neuberger Berman Taiwan Limited, which is licensed and regulated by the Financial Services Commission (“FSC”) and a separate entity and independently operated business, with FSC operating license no.:(102) FSC SICE no.011, and address at: 10F, No. 1, Songzhi Road, Taipei, Telephone number: (02) 87268280; and in Japan and Korea by Neuberger Berman East Asia Limited, which is authorized and regulated by the Financial Services Agency of Japan and the Financial Services Commission of Republic of Korea, respectively (please visit http://www.nb.com/japan/risk_eng.html for additional disclosure items required under the Financial Instruments and Exchange Act of Japan). Except for the foregoing, this material is not intended for use or distribution within or aimed at the residents of any other country or jurisdiction. This document is not an advertisement and is not intended for public use or additional distribution in the following jurisdictions: Brunei, Thailand, Malaysia and China.

The “Neuberger Berman” name and logo are registered service marks of Neuberger Berman Group LLC.
© 2014 Neuberger Berman Group LLC. All rights reserved.