Economic Research:

U.S. Weekly Financial Notes: Still Holding On

Credit Market Services: Beth Ann Bovino, U.S. Chief Economist, New York (1) 212-438-1652; bethann.bovino@standardandpoors.com Satyam Panday, U.S. Economist, New York; satyam.panday@standardandpoors.com Research Contributor: Kaustubh Pandey, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

Table Of Contents
Singing Off Key The Game Ain't Over Spending Slowed, But People Are Still Happy Financial Market Highlights

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Economic Research:

U.S. Weekly Financial Notes: Still Holding On

New government estimates have GDP expanding by 2.5% in the second quarter--much better than the 1.7% rate originally estimated as the private sector kept spending despite headwinds from D.C. The third quarter doesn't look so bright, with soft July consumer spending and a pullback in durable orders suggesting some weakness ahead. Economic releases this week include: U.S. durable goods orders tumbled by 7.3% in July, erasing the 3.9% increase in June and much worse than the 3.7% drop consensus expected. The Chicago Purchasing Managers Index (PMI) edged up to 53.0 in August from 52.3 in July. Personal spending edged up by 0.1% in July, worse than the 0.3% consensus expectation though after a 0.3% increase in June. Consumer spending rose by just 0.1% after an upwardly revised 0.6% jump in June (was up 0.5%). People are still happy: The Conference Board consumer confidence index edged up by 0.5 to 81.5 in August. The University of Michigan consumer sentiment index rose to 81.5 in August from its preliminary reading of 80.0 but remained below the six-year high of 85.1 in July. The S&P/Case-Shiller 20-City Composite Home Price Index increased 12.1% year over year in June, in line with our estimate and just off of May's seven-year peak of 12.2%. But the pending home sales index slipped by 1.3% month over month to 109.5 in July. Initial jobless claims fell by 6,000 to 331,000 in the week ended Aug. 24. Continuing claims fell by 14,000 to 2.989 million in the week ended Aug. 17, pushing the insured adjusted unemployment rate down by 0.1% to a cycle low of 2.3%. Oil prices jumped by $2 to $108/barrel on Friday afternoon.

Singing Off Key

The treble remains at high pitch while the bass has softened a beat. Lean inventory, together with rising home price expectations and pent-up demand, has helped continue to push prices higher. But increasing costshigher buying prices as well as mortgage rateshave started to act as limiting factors in the face of demand. We are beginning to see the results and although the music is a little off-key, housing is still singing and will likely continue throughout the year. The S&P/Case-Shiller 20-City Composite Home Price Index increased 12.1% year over year in June, in line with our estimate and close to May's seven year-peak of 12.2%. The 20-City Composite Home Price Index rose 0.9% month over month (seasonally adjusted) in June following a 1.0% increase in May., and it has been gaining a monthly average of 1.5% the first half of 2013. Although the monthly city-by-city data showed the pace of price increases is moderating, all 20 cities reported year-over-year gains, led by gains of 24.9% in Las Vegas and 24.5% in San Francisco. The smallest gain was in New York, which advanced 3.3%. The 20-City Index is still 23% below its July 2006 peak, though it is far better than the record low of 35% below peak in February and March 2012. The recovery from the March 2012 lows is 19.0%. Keep in mind that the June index point is based on the three-month rolling average of repeat sales data for April, May, and June--the period when the 30-year fixed home mortgage rate was mostly under 3.6% and inventory was tight.

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

Since then, mortgage rates have risen sharply by a percentage point, and the inventory level has improved, although it's still lean. The rising costs may discourage buyers, and the sharp increases in the index may dampen in the third quarter. In fact, we have started to see signs of expected pullback in home sales. Following last week's remarkable drop in new home sales for July (they fell 13.4% month over month), this week's Pending Home Sales Index--which measures contracts signed in July and offers an early signal on final sales of existing homes--slipped 1.3% in July to 109.5, adding to a 0.4% decline in June after a 5.8% spike in May. The pullback is partly because home sales fall every summer in both rising and falling markets and partly because the cost is increasing. Weakness is concentrated in the two high-cost regions of the Northeast and the West. The National Association of Realtors, which compiles the report, notes that supply constraint is a special problem in the West. As supply constraints loosen and homebuilders find ways to add inventory, the increase in prices should dampen. Higher interest rates (although still relatively low, historically) will also pressure prices and sales over time. However, a slowdown from month-over-month sharp price gains in the first half of 2013 and higher rates are not necessarily bad. Rising interest rates may, in fact, encourage banks to further loosen lending, while lower price increases should defray some rising costs due to interest rates, and thus, entice home-buyers on the sidelines to buy.

The Game Ain't Over

After a slew of bad news, the Bureau of Economic Analysis' (BEA) second estimate of second-quarter GDP finally brought some good news to markets. GDP was revised up sharply to an annualized 2.5% pace--much stronger than the BEA's first estimate of 1.7%. We weren't surprised to see this improvement. As we warned a few weeks ago, we expected the strong June trade and construction reports, which weren't available when the BEA came out with its first estimate, would cause the second-quarter GDP figure to be revised up significantly. But it was even stronger than the 2.3% (annualized) we expected (consensus was looking for 2.2%) and the 2.1% gain that we forecasted in July. It also increased market expectations that the Federal Reserve will decide to start tapering its bond purchases in September. We disagree. Although the stronger-than-expected growth does move the needle a little closer to a September date, we still expect the Fed to disappoint market expectations and wait until December. The GDP numbers suggest more momentum in in the first half of the year, which is good news. But recent data have been weak. Since the Fed met at the end of July, we have seen a softer-than-expected jobs report, weakness in housing data, and a pullback in factory output. Inflation indicators also remain below where the Fed would like them to be, and the two storms from D.C. have yet to hit the economy's shores. In addition, geopolitical risk is on the rise, and with it higher oil prices. These are all good reasons to be "patient," as one Federal Open Market Committee (FOMC) member counseled at their last policy meeting. Still, the upwardly revised GDP data for the second quarter is somewhat of a relief. GDP growth accelerated from an abysmal 0.1% rate in the fourth quarter and a so-so 1.1% pace in the first to a 2.5% rate in the second, exhibiting more growth momentum than we earlier thought. As we expected, the much narrower-than-expected trade data, which hit a four-year low in June on strong exports and

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

a sizable drop in imports, explain most of the upward revisions to overall growth in the second quarter. In the BEA's second estimate, net exports now added 0.8 percentage points to growth (the BEA expected a flat reading in its first estimate). Based on the upbeat construction spending report, we also weren't surprised to see that nonresidential construction contributed more than the BEA earlier estimated. Nonresidential construction jumped by an annualized 16.1%, up from a 6.8% rate in the BEA's first estimate. Inventories contributed a larger 0.6 percentage points to growth (was 0.4 percentage points). Consumer spending remained stable at a 1.8% pace of growth in the BEA's second estimate, the same as in the first. However, equipment spending was revised down to a 2.9% rate (was up 4.1%), and the fiscal drag was worse than the BEA earlier thought. Government spending was revised to an even lower 0.9% annualized decline in the BEA's second estimate (was down 0.4% in the first estimate) thanks to a revised 0.5% drop in state and local spending (originally up 0.3%). The second-quarter drop extended larger declines of 4.2% in the first quarter and 6.5% in the fourth. The cumulative 6.6% drop in real government spending since second-quarter 2010 dwarfs the smaller 3.8% drop after the Vietnam War. Economic activity in the third quarter is showing signs of fatigue. There are indications that the rise in interest rates is hurting interest-sensitive sectors. Last week, new home sales took a 13.5% month-over-month dive in July. U.S. durable orders didn't fare much better. U.S. durable goods orders tumbled by 7.3% in July following a 3.9% increase in June, which is the biggest drop since August 2012. The drop was much steeper than the 3.7% drop consensus expected, though it came after three consecutive monthly gains. The decrease was largely due to a sharp 19.4% drop in transportation equipment orders--though it comes after three straight monthly gains and is still up 5.2% year to date. The 52.3% drop in volatile orders for civilian aircraft largely explains the overall weakness and only partially offsets the 33.8% and 67.6% gains reported for the prior two months. Excluding the pullback in orders for transportation equipment, durable goods orders fell by a more modest 0.6% in July, following a 0.1% increase in the previous month. Orders for nondefense capital goods excluding aircraft (core capital goods order), which is an indicator for business spending, fell by 3.3% in July after rising by 1.3% in June. Shipments of core capital goods, a category used to calculate quarterly economic growth, dipped 1.5% in July, following a drop of 0.8% in June.

Spending Slowed, But People Are Still Happy

American's income and expenditure numbers in July came in soft, suggesting that the Fed has cushion to maintain its pace of quantitative easing. Personal income was up by an expected 0.1% month over month in July and is up by 3.3% for the year. Disposable personal income grew 0.2%, excluding taxes and transfers, and is up by 2.2% for the year. When adjusted for inflation, disposable income is up 0.1% month over month and just 0.8% for the year as higher prices at the pump cut into household purchasing power.

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

Given the low gains in income, it is not surprising that personal spending gain slowed to a 0.1% pace in July. It was weaker than the 0.3% increase consensus expected though it comes after a revised 0.6% jump in June (was up 0.5%) and a 0.2% increase in May. Real consumer spending was flat in July after a 0.2% increase in June. The personal savings rate held at 4.4% in July. The core Personal Consumption Expenditures deflator, excluding food and fuel, was up a meager 1.2% over last July, now up for the fourth straight month and too low for the Fed. Overall, the smaller paychecks and meager spending, together with soft inflation, give the Fed more reason to hold off on tapering in September. People are optimistic about tomorrow. Both consumer confidence readings climbed higher in August. The Conference Board's consumer confidence report's composite headline index shows a slight increase to 81.5 this month from July's revised 81. While the present situation component weakened to 70.7 from 73.6, the expectations component was up 2.7 points to 88.7. The University of Michigan Consumer Sentiment reading was also up, at 82.1, from its mid-month reading of 80, albeit still below July's recovery high number of 85.1.

Financial Market Highlights

Below are the financial market highlights for the week ending Aug. 29, 2013.

Treasury yield curve

The 10-year Treasury yield dropped to 2.76% on Friday afternoon, from 2.89% the previous week after better-than-expected revised U.S. GDP data for the second quarter failed to deflect disappointing data on the consumer. Investors sought refuge in safe-haven asset amid signs that turmoil in Syria may lead to wider military conflict, which further supported the drop in yields. The rate of three-month Treasury bills decreased one basis point (bp) to four bps this week. The two- to 10-year spread decreased seven bps to 240 bps over the week and was 101 bps above a year ago. The 10-year Treasury spread above inflation-protected bonds--a measure of inflation expectations--increased four bps to 166 bps over the past week and was down six bps above the previous year.
Table 1

Treasury Yield Curve (Constant Maturities)

--Change over-(%) Three-month Six-month One-year Two-year Five-year 10-year 30-year Inflation Indexed Treasury (LT) Current level One week Four weeks 13 weeks One year 0.04 0.07 0.13 0.40 1.63 2.80 3.78 1.15 (0.01) (0.01) 0.00 0.04 0.04 (0.03) (0.08) (0.07) 0.00 (0.00) 0.02 0.08 0.26 0.20 0.13 0.15 (0.01) (0.01) 0.01 0.12 0.67 0.72 0.54 0.72 (0.07) (0.07) (0.05) 0.13 0.93 1.14 1.01 1.09

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

Chart 1

Credit markets
Risk aversion increased this week as U.S. equity markets fell across the board in response to a potential conflict between the U.S. and Syria. The equity market volatility index (VIX), a measure of the market's uncertainty, increased to 15.40 from 15.02 the previous week. The T-bill-to-eurodollar (TED) spread, a measure of banks' willingness to lend, increased one bp to 22 bps this week and was 11 bps below a year ago. Fixed mortgage rates remained stable at 4.58% this week. Mortgage application decreased 2.5% in the week ended Aug. 23 after slipping 4.6% the previous week. The refinance index decreased 5% after dropping 8% the week before and the purchase index increased 2% after a 1% rise.
Table 2

U.S. Credit Spreads

--Change over (%)-Current level One week Four weeks 13 weeks One year Money market Three-month euro 90-day corporate paper Swap rates One-year 0.34 0.00 0.00 0.02 (0.06) 0.26 0.08 (0.00) (0.01) (0.00) (0.01) (0.01) (0.02) (0.16) (0.11)

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

Table 2

U.S. Credit Spreads (cont.)

Two-year Five-year 10-year 30-year Other key interest rates Prime rate 15-year mortgage 30-year mortgage Volatility markets VIX equity market volatility Swaption two-10 year Liquidity spreads (bps) Three-month eurodollar to three-month Treasury 10-year swaps to 10-year Treasury bps--Basis points. N.A.--Not applicable. 22.50 18.80 21.49 16.40 23.31 19.80 22.60 14.75 31.61 9.00 15.40 27.36 0.39 0.52 2.21 (0.96) 1.06 (2.58) (0.81) (11.96) 3.25 3.60 4.58 0.00 0.16 0.18 0.00 0.21 0.27 0.00 0.83 0.99 0.00 0.71 0.92 0.56 1.79 2.99 3.79 0.02 0.04 (0.01) (0.03) 0.07 0.21 0.19 0.14 0.13 0.66 0.77 0.63 0.12 0.92 1.24 1.25

Fed policy and interest rate outlook

The FOMC statement after the July 30-31 meeting kept policy unchanged, as expected, but said that the committee viewed the pace of activity as "modest" instead of "moderate"--a more pessimistic take. It said that the committee acknowledged risks from rising mortgage rates, taking a step back from tapering from what it said in the June statement. The Fed said, "Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated." The FOMC minutes to the meeting noted that the recent rise in mortgage rates posed some risk to the housing recovery. We still expect a December start date for tapering bond purchases. Minutes of the two-day FOMC meeting ended July 31 showed a dovish tilt. The minutes revealed that several participants were concerned that fiscal policy tightening had a bigger impact on spending in the first half of the year than they previously thought. While the FOMC largely agreed that some labor-market indicators improved since the third round of quantitative easing (QE3) began last fall--including the unemployment rate and payroll growth--other indicators were less positive, including labor-force participation, the rate of hiring and quitting, and the number of part-time workers. As a result, as of late July, a number of participants indicated "that they were somewhat less confident about a near-term pickup in economic growth than they had been in June." The meeting participants noted that the incoming information on economic activity was mixed and expressed that any changes to the bond-buying program would hinge upon improvement in economic data. Some FOMC participants also saw low inflation (indicative of deficient aggregate demand) as reason for continuing asset purchases as currently planned. Still, most expect the Fed will slow down the pace of its $85 billion-per-month asset purchase plan by the end of the year, as long as the economic recovery continues. The Fed's 12-district Beige Book (July 17) indicated economic activity continued to expand at a "modest to moderate" pace across all Federal Reserve Districts. Manufacturing expanded, and consumer spending picked up along with residential construction, according to the report. Hiring held steady or increased at a measured pace in most districts,

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

but the Fed noted some reluctance to hire permanent or full-time workers. Manufacturing expanded in most of the Fed's 12 bank districts, though storms led to a "slight contraction" in the Kansas City region. The growth was moderate in Chicago, Cleveland, and St. Louis but modest in Boston, New York, Atlanta, and San Francisco, the report said. Residential construction continued to be the source of much of the gains as wood product makers stepped up production in the St. Louis and San Francisco areas. A cement producer in Dallas reported brisk activity, and demand for construction equipment picked up in the Chicago area.
Table 3

Fed Policy And Interest Rate Outlook

--Change over-Current level One week Four weeks 13 weeks One year Funds target Effective 0.25 32.00 0.00 31.91 0.00 31.91 0.00 31.92 0.00 31.87

Table 4

Fed Funds Futures Contracts (Yield)

--Change over (%)-Federal Open Market Committee meeting date Contract month Aug-13 Sep. 17/18 Oct. 29/30 Sep-13 Oct-13 Nov-13 Dec. 17/18 Jan. 28/29 Dec-13 Jan-14 Current level (%) One week Four weeks 13 weeks 0.09 0.09 0.11 0.11 0.12 0.13 (0.00) (0.00) 0.00 0.00 0.00 0.00 (0.01) (0.01) (0.01) (0.01) (0.01) (0.00) (0.03) (0.03) (0.02) (0.02) (0.02) (0.01)

Table 5

Euro Dollar Futures Curve

--Change over-Contract month Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Current level One week Four weeks 13 weeks 0.19 0.19 0.20 0.22 0.22 0.24 0.00 (0.00) (0.00) (0.00) (0.01) (0.01) (0.01) (0.01) (0.01) (0.01) (0.01) (0.01) (0.02) (0.03) (0.03) (0.04) (0.03) (0.03)

Global interest rates

Key central banks remain cautious in their outlooks. Recent trends include: The European Central Bank (ECB) left its benchmark refinancing rate at a record low of 0.50% on Aug. 1, following signs of a tentative recovery in the eurozone economy. ECB President Mario Draghi hinted that policy would not be tightened until well into next year at the earliest, although the central bank gave no time horizon for when rates might move. The Bank of England held its bank rate at 0.5% at its Aug. 1 meeting and maintained the size of its asset purchase

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

program at 375 billion. The Bank of Japan (BoJ) maintained its overnight call rate target between 0% and 0.1% at its Aug. 8 Monetary Policy Committee (MPC) meeting. The BoJ maintained its pledge to increase base money, or cash and deposits, at an annual pace of 60 trillion to 70 trillion. The People's Bank of China, in its MPC statement released on June 23, said it will fine tune its policies as needed and will continue to implement prudent monetary policy. The Reserve Bank of Australia in its Aug. 7 MPC meeting reduced its cash rate by 25 bps to a record low of 2.50% to help the economy counter the impact of a fading mining boom. The Bank of Canada held its target overnight rate at 1% on July 17. In a statement, the bank signaled it intends to make no changes as long as considerable slack remains in the economy, inflation remains muted, and household finances continue to improve. The Norges Bank left its interest rate unchanged at 1.5% for the eighth time in a row but signaled that it is likely to cut rates slightly in the coming year as inflation will take longer to rise and economic activity is lower than expected. Sweden's Riksbank left its seven-day repo rate unchanged at 1.25% on April 17, citing the need to "support the recovery" in a time of timid economic development in the U.S. and Asia and less solid gains in Europe. The Swiss National Bank retained the currency ceiling and its key interest rate near the target band of 0.00%-0.25% on June 20. Poland's central bank lowered the reference rate by 25 bps to 2 .75% from 3% to kick start the flagging economic growth. The Reserve Bank of New Zealand left its key rate unchanged at 2.5%--a record low--on July 24 and reaffirmed its pledge to keep rates unchanged through the end of the year. South Korea's central bank left its key rates unchanged at 2.50% on Aug. 8 amid signs of recovery in Korea. However, policymakers remained cautious amid uncertainty over the U.S. Federal Reserve's stimulus program and China's slowing economy. Bank of Thailand retained the main policy rate at 2.5% for the second time in a row as inflation remained subdued and economic growth weakened in the second quarter.
Table 6

Global Interest Rates

--Change over-Current level One week Four weeks 13 weeks One year 12-month LIBOR rates U.S. Europe U.K. Swiss Japan 0.67 0.49 0.88 0.25 0.41 0.00 0.01 (0.00) (0.00) 0.00 (0.00) 0.02 0.02 0.01 (0.00) (0.02) 0.10 (0.00) 0.01 (0.02) (0.37) (0.29) (0.54) (0.11) (0.13)

10-year bond yields U.S. Canada Europe U.K. Swiss Japan 2.80 2.83 1.90 2.61 1.18 0.80 (0.03) (0.05) 0.07 (0.27) 0.07 (0.00) 0.20 0.21 0.36 0.09 0.08 (0.03) 0.72 0.69 0.49 0.60 0.46 (0.09) 1.14 0.92 0.54 0.94 0.58 (0.15)

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

Table 6

Global Interest Rates (cont.)

Aussie 3.92 0.03 0.25 0.60 0.80

Foreign exchange rates

The dollar was mixed against most trading partners this week as concerns over a potential U.S. strike on Syria deterred risk-taking and prompted investors to buy the safest assets. The euro dropped against the dollar this week and was trading at $1.32/ on Friday afternoon from the previous week's $1.339/. The yen strengthened against the dollar this week and was trading at 98.23/$ on Friday afternoon from the previous week's 98.58/$. The U.S. trade deficit narrowed to $34.2 billion in June, down from a revised $44.1 billion (was $45 billion) in May. Exports rose 2.2% to $191.2 billion, while the value of imports fell 2.5% to $225.4 billion. The deficit with China fell 4.3% to $26.6 billion. In our view, the much narrowerthan-expected trade deficit should help improve the foreign trade component and overall GDP growth in the second quarter.
Table 7

Foreign Exchange Rates (Spot)

--Change over (%)-Current level One week Four weeks 13 weeks One year US$-Mexican pesos US$-C$ -US$ -US$ US$-Swiss francs US$- A$-US$ 13.36 1.05 1.32 1.55 0.93 98.35 0.89 2.05 0.15 (0.86) (0.54) 0.82 (0.37) (0.87) 4.17 1.80 0.26 2.54 (0.64) (1.20) 0.06 4.48 2.28 1.46 1.79 (2.33) (2.36) (7.58) 0.09 6.12 5.88 (1.78) (3.06) 25.08 (13.21)

Commodity price indices

Commodities gained this week partly because of better-than-expected U.S. economic growth figures and the prospect of a military intervention by the West on Syria. Oil prices increased and were trading at $107/barrel on Friday afternoon from the previous week's $106.07/barrel after positive economic data combined with geopolitical tension in the Middle East increased supply concerns, boosting oil prices. However, the upside was limited, and concerns over supply situation eased after possibilities of military intervention by the West on Syria dimmed and natural gas prices edged down to $3.350/mmbtu from last week's $3.380/mmbtu. The gold price remained stable at $1,396/ounce on Friday (early afternoon) from last week's $1,367/ounce as geopolitical tensions in Syria eased and the better-than-expected second-quarter U.S. GDP growth reading dampened demand of gold. Livestock prices decreased 1% this week and were down 1.4% over the past year.
Table 8

Commodity Price Indices

--Change over (%)-Current level One week Four weeks 13 weeks One year CRB Gold (CME) 292.48 1,399.56 0.40 2.30 2.94 5.79 2.53 0.89 (4.62) (16.12)

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

Table 8

Commodity Price Indices (cont.)

Crude oil (CME) Natural gas (CME) GSCI Agriculture Livestock 107.30 3.53 654.98 656.99 2,042.05 1.09 2.86 1.20 0.62 (1.02) 2.61 0.62 2.83 1.02 0.96 13.98 (16.08) 4.66 (7.04) 4.24 11.83 31.62 (2.21) (22.66) (1.38)

U.S. equity market

Equity markets remained mixed this week as U.S. GDP data pointed to stronger-than-expected economic growth, though geopolitical uncertainty over Syria limited gains. The S&P 500, Dow, and Nasdaq dropped sharply and were trading at 1,635; 14,817; and 3,595, respectively, on Friday afternoon after data showed a drop in consumer confidence and a smaller-than-estimated gain in consumer spending dampened investor confidence. Stocks were in a bear market from October 2007 to March 2009, but record corporate profits and three rounds of the Fed's monetary stimulus have helped markets to recover from the losses they suffered during the period. The S&P 500 is now up 14.65% from its Dec. 31, 2012, close of 1,426 and is up 141.86% from its March 9, 2009, low of 676.
Table 9

U.S. Equity Market

--Change over (%)-Current level One week Four weeks 13 weeks One year Standard & Poor's indices S&P 1500 S&P 500 S&P 400 S&P 600 Other indices Dow Jones Industrial Nasdaq Composite DJ Wilshire 14,904.27 3,625.19 17,532.21 (0.78) 0.64 (0.02) (4.04) 0.36 (2.09) (2.76) 4.51 0.63 13.69 18.05 19.68 382.74 1,648.54 1,208.00 583.10 (0.13) (0.19) 0.20 0.51 (2.22) (2.33) (1.71) (0.82) 0.10 (0.22) 1.42 5.02 17.98 17.03 24.42 27.51

U.S. equity market by sector

Equity sectors remained mixed this past week, through Thursday. The decliners were led by utility stocks, down 1.1%, closely followed by financial stocks, down 0.7%. In contrast, the gainers were led by energy stocks, up 1%. This was closely followed by material stocks, up 0.4%. All sectors have now turned positive, except telecom, on a year-over-year basis, led by financial and consumer discretionary, up 31.1% and 28.6%, respectively.
Table 10

U.S. Equity Market Performance By Sector

--Change over (%)-Current level One week Four weeks 13 weeks One year S&P 500 Consumer discretionary 1,648.54 460.45 (0.19) 0.01 (2.33) (2.01) (0.22) 2.10 17.03 28.60

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

Table 10

U.S. Equity Market Performance By Sector (cont.)

Consumer staples Energy Financials Health care Industrials Information technology Materials Telecommunications Utilities 408.54 595.01 266.26 572.06 385.65 510.93 256.70 149.87 189.29 (1.09) 1.03 (0.66) (0.07) (0.30) (0.15) 0.36 (0.64) (0.13) (4.36) (2.37) (3.82) (3.09) (1.12) 0.51 0.38 (5.66) (5.34) (4.21) (1.26) (0.17) 0.60 1.97 0.82 0.32 (7.33) (2.88) 11.43 10.95 31.14 27.95 21.83 4.20 14.04 (0.89) 2.50

Global Standard & Poor's stock indices

The global equity remained mixed this week despite better-than-expected economic data from the U.S. as investors remain hesitant in the backdrop of tension in Syria and worries about the Fed's stimulus tapering. The decliners were led by Latin American and Japanese markets, down 1.3% and 0.8%, respectively. In contrast, the gainers were led by Asian Pacific and Canadian stocks, up 1.5% and 0.4%. Japanese and Australian markets continue to post the largest 12-month gains, up 51.3% and 19%, respectively.
Table 11

Global Standard & Poor's Stock Indices

--Change over (%)-Current level One week Four weeks 13 weeks One year Global 1200 Global 100 S&P 500 Canada 50 LatAm 40 Europe 350 Japan 150 Asia Pac 50 Aussie 50 1,663.48 1,393.13 1,648.54 731.21 3,487.14 1,231.92 958.92 3,349.83 5,269.95 (0.50) (0.60) (0.19) 0.44 (1.35) (0.64) (0.77) 1.46 (0.08) (1.21) (1.89) (2.33) (0.35) (3.33) 0.80 (2.29) 1.36 1.02 (0.24) (1.46) (0.22) (4.16) (14.19) (1.08) (4.52) (0.19) 2.46 15.55 14.79 17.03 5.95 (15.48) 12.20 51.31 7.34 19.04

Global equity market performance by sector

International sectors dropped sharply this week, through Thursday, except energy and telecom stocks, which were up 1.1% and 0.7%, respectively. The decliners were led by financial stocks, down 1.9%, closely followed by industrial stocks, down 1.7%. During the past year, consumer discretionary stocks (up 28.4%) posted the largest gain, followed by financial stocks (up 26.3%).
Table 12

Global Equity Market Performance By Sector

--Change over (%)-Current level One week Four weeks 13 weeks One year S&P Global 1200 1,663.48 (0.50) (1.21) (0.24) 15.55

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Economic Research: U.S. Weekly Financial Notes: Still Holding On

Table 12

Global Equity Market Performance By Sector (cont.)

Consumer discretionary Consumer staples Energy Financials Health care Industrials Information technology Materials Telecommunications Utilities 2,195.35 2,227.25 2,590.80 1,062.15 2,119.35 1,826.37 1,853.75 2,290.13 1,115.61 1,246.27 (1.23) (1.52) 1.12 (1.88) (1.24) (1.68) (0.64) (1.45) 0.73 (0.80) (3.04) (4.55) (1.26) (3.85) (2.54) (2.58) (1.12) 0.87 (2.02) (4.70) 2.51 (3.62) (1.18) (2.01) (0.02) 0.18 (1.64) (2.84) 0.16 (2.69) 28.39 10.04 5.55 26.26 25.28 21.02 7.37 3.22 3.18 3.02

Table 13

Economic Release Calendar

Date 2-Sep 3-Sep 10:00 Time Release Labor Day--No scheduled releases ISM (manufacturing) Construction spending (%) 4-Sep 8:30 10:00 14:00 5-Sep 8:15 8:30 U.S. trade balance (bil. $) Unit vehicle sales (mil.) Beige Book Aug July July Aug Sept. 17-18 180 1.2 0.8 325 55 (3) 165 170 7.4 July 14 180 1.4 0.9 330 55 (3.4) 177 175 7.4 12.2 200 0.9 1.4 331 56 1.5 162 161 7.4 13.8 54.8 0.3 (38.7) 15.8 54 0.3 (38.6) 55.4 (0.6) (34.2) 15.7 For Forecast Consensus Previous

The ADP Employment Survey (000) Aug Productivity Rev (%) Unit labor costs Q2 Q2 31-Aug Aug July Aug

8:30 10:00

Initial claims (000) ISM nonmanufacturing Factory orders

6-Sep

8:30

Nonfarm payrolls (000) Private payrolls (000) Unemployment rate

9-Sep 10-Sep

15:00

Consumer credit (bil. $) No scheduled releases Wholesale sales (%) Export Trade Price Index Import Trade Price Index

11-Sep 10:00 12-Sep 8:30

July Aug

0.2 0.2 0.3

0.3 0.0 0.3 (147.9) 0.3 0.3 0.3 0.2 79.5 0.3

0.4 (0.1) 0.2 (97.6) 0.2 0.5 0 0.1 80 0

14:00 13-Sep 8:30

Treasury budget (bil. $) Retail sales (%) Retail sales (excluding auto) (%)

Aug Aug

(135) 0.1 0.3

8:30

PPI (%) PPI (excluding food and energy) (%)

Aug

0.1 0.2

9:55 10:00

Consumer sentiment (prelim) Business inventories (%)

Sep July

79.5 0.2

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