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Weekly Macro Updates

Initial Jobless Claims (Jul 13) 216k est., 216k actual, 208k prior
Continuing Claims (Jul 6) 1700k est., 1686k actual, 1728k prior
Import Price Index YoY (Jun) -2.1% est., -2.0% actual, -1.1% prior: R+
Export Price Index YoY (Jun) -1.6% actual, -0.8% prior: R-
Retail Sales Ex. Auto & Gas MoM (Jun) 0.3% est., 0.7% actual, 0.5% prior
Retail Sales Control Group (Jun) 0.3% est., 0.7% actual, 0.6% prior: R+
Industrial Production MoM (Jun) 0.1% est., 0.0% actual, 0.4% prior
Existing Home sales MoM (Jun) -0.4% est., -1.7% actual, 2.5% prior
Housing Starts MoM(Jun) -0.7% est., -0.9% actual, -0.4% prior: R+
Building Permits MoM (Jun) 0.1% est., -6.1% actual, 0.7% prior: R+
Philadelphia Federal Reserve Business Outlook (July) 5.0 est., 21.8 actual, 0.3 prior
Leading Index (Jun) 0.1% est., -0.3% actual, 0.0%
University of Michigan Sentiment Survey (Jul P) 98.8 est., 98.4 actual, 98.2 prior
Richmond Federal Manufacturing Index (Jul) 5 est., -12 actual, 2 prior: R- 

Strong or Improving
Inconclusive or lacking trend
Weak or declining
R+ Revised up
R- Revised down

Directional change based on general
long-term tends.

Capital Market Implications

There were a number of important economic releases last week, but June’s retail sales report was the week’s biggest surprise.  For the month, sales (excluding autos and gas) were above expectations and broad based, including healthy sales at car dealers and strong receipts at non-store retailers.  Control group sales, considered the best gauge of consumer spending, gained 0.7% in June.  Overall, control group sales rose 7.5% annualized during the second quarter, the best quarterly reading since 2005.  This translated into 4.0% annualized real consumption growth in the second quarter, which was well ahead of the first quarter’s gain of 0.9%. It also suggests second-quarter GDP was relatively healthy irrespective of softness in the manufacturing sector.

Last week, although a few stocks made major moves (after reporting earnings surprises), market reaction overall was muted and stock indexes closed out the week just shy of their record highs.  For the week, the S&P 500 Index fell -1.2% while the Dow Jones Industrial Index slipped -0.6%.  Netflix announced a surprisingly weak quarter, which drove the communication sector down more than -3.0%.  Energy also did poorly, off nearly -3.0%, as geopolitical events continued to weigh on the sector.  On the international front, developed markets ended the week unchanged while emerging markets gained 0.8%.  After a dovish speech by a Federal Reserve governor last week, rumors of a larger-than-expected cut in short rates circulated.  Although it turned out the rumors were exaggerated, interest rates declined across the curve last week and bond prices rose.  As such, most areas of the bond market rallied last week with only high yield bonds down slightly.  US corporate bonds were the week’s standouts, up 0.5%.