Reporting from San Francisco

This week’s report will be brief because I’m at the MoneyShow San Francisco this week giving presentations, signing books and appearing on a local radio show.  The markets aren’t doing much, because the Fed is having its big annual meeting in Jackson Hole, Wyoming, this week. Investors are waiting to see if any news comes out of that meeting.

The Data

The small amount of data released in the last week continued the recent trend of giving mixed signals about the economy.

New home sales soared 12.4% higher in July. June’s high level of sales was revised down by only 10,000 units. The latest new home sales are at highs from the economic recovery. The sales justify the optimism among home builders reported in the Housing Market Index from the National Association of Home Builders (NAHB) for about a year. But the higher sales were obtained by price cutting. The median price declined 5.1% in the last month, and now the 12-month price trend is negative.

Existing home sales took a sharp turn down. After reaching a recovery high in June, sales declined 3.2%. That makes the 12-month sales change negative 1.6%. Also, the median price declined 1.4%. That puts the 12-month price change at positive 5.3%.

The FHFA House Price Index rose a modest 0.2%. That puts the 12-month price increase at 5.6%. In the spring, the 12-month increase was 6% and above. The report is consistent with the other two reports, indicating that sellers are reducing prices to close deals.

The manufacturing data continue to show the sector still is trying to find a bottom. The Richmond Fed Manufacturing Index declined 11 points after registering a positive 10 last month. This is consistent with similar turns in the Empire State Manufacturing Survey and Philadelphia Fed Survey reported last month. The Kansas City Fed Manufacturing Index was negative 4 this month, but that’s an improvement from last month’s negative 6. Because the Kansas City Fed’s region is more adversely affected by the collapse in energy prices than the other regions (except possibly Dallas), this consistently has been one of the worst of the manufacturing reports. The slight improvement this month is a minor positive for the economy.

Likewise, the PMI Manufacturing Index Flash for the first half of August declined a little to 52.1. This level shows modest growth in manufacturing. The only positive segment of the report was that exports hit a two-year high.

But Durable Goods Orders increased sharply in July. June’s dismal number was revised down to a 4.2% decline. But July saw a 4.4% increase. Even after excluding the volatile transportation sector, orders increased by 1.5%. Perhaps more importantly, core capital goods orders increased by 1.6%. Those are the basic business equipment orders and show that perhaps businesses are making new investments.

The service sector of the economy held steady, according to the PMI Services Flash Index. The index remained at 50.9. Any measure above 50 indicates growth in the service sector. This is the lowest reading since February.

New unemployment claims declined again, by 1,000 claims this week. That keeps both the current week’s claims and the four-week average near historic lows.

The Markets

Emerging market stocks tumbled this week, declining 1.09% for the week ended with Wednesday’s close. The All-Country World Index lost 0.30%. The S&P 500 lost 0.24%. The Dow Jones Industrial Average lost 0.42%. The Russell 2000 was the only major index in positive territory for the week, returning 0.84%.

Long-term bonds gained 0.34%. Investment-grade bonds returned 0.33%. Treasury Inflation-Protected Securities (TIPS) rose 0.20%. High-yield bonds lost 0.01%.

The dollar declined 0.04%.

Energy-based commodities gave up some of last week’s gains, declining 1.14% for the week. Broad-based commodities lost 1.22%. Gold lost 1.62%.

Bob’s News & Updates

If you’re in the Pittsburgh area on Sep. 20, consider attending my presentation to the Pittsburgh chapter of the American Associatin of Individual Investors (AAII). Details including registration information should soon be available here.

I’ll also be at the new MoneyShow Dallas, Oct. 20-21. I’ll provide details later.

Some Reading for You

The annual estimate of retirement medical spending increased this year.

So far in 2016, the economic data has shown more positive than negative surprises.

This article argues that regulations and other changes have been offsetting central banks’ efforts to stimulate economies.

I comment and link to these and other items on my public blog at http://www.bobcarlson.net.