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Economic news was mixed for various sectors. By week’s end, traders were undecided on whether good news on the economy was bad news on Fed tapering. Earnings results were mixed although techs were mostly positive.
 Except for techs, it was mostly a moderately oscillating week on a daily basis with minimal net change. Traders are waiting for this coming week’s news on Fed policy and the July employment report.
At week’s open, equity indexes generally gained, led higher by banks and materials companies. Disappointing earnings from McDonald's cut into the Dow Jones Industrial’s gains. Most indexes declined Tuesday on lackluster earnings and a sharp drop in the Richmond Fed manufacturing index. At mid-week most equities slipped further despite a much better than expected new home sales report. The Dow eased as Caterpillar dropped after its second quarter earnings fell short of analyst estimates and it cut its forecast for full year performance. AT&T was down after it missed forecasts for its latest results. Techs were flat with Apple providing some positive lift. Boeing's positive results reduced the Dow’s dip.
 Stock gained on Thursday on earnings—notably from Facebook which reported a huge jump in mobile advertising revenue. Equities were up despite soft durables orders at the core level. And the Dow nudged up to a new record high. Nonetheless, major indexes generally were little changed Friday. Mixed news included Caterpillar dipping after cutting its forecast and Apple gaining after beating estimates for profits and sales.
Final results were mixed this past week. The Dow was up 0.1 percent; the S&P 500, unchanged; the Nasdaq, up 0.7 percent; the Russell 2000, down 0.2 percent; and the Wilshire 5000, up 0.1 percent.
For the year-to-date, major indexes are up as follows: the Dow, up 18.7 percent; the S&P 500, up 18.6 percent; the Nasdaq, up 19.7 percent; the Russell 2000, up 23.4 percent; and the Wilshire 5000, up 19.7 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 Treasury yields firmed this past week, largely on the view that the Fed will either actually trim bond purchases after its September policy meeting or announce a cutback. The only notable daily change in rates was Wednesday on stronger than expected new home sales.
For this past week Treasury rates were up as follows: the 2-year note, up 2 basis points; the 5-year note, up 7 basis points; the 7-year note, up 11 basis points; the 10-year note, up 9 basis points; and the 30-year bond, up 6 basis points. The 3-month T-bill edged down 1 basis point.
 The price of crude reversed course this past week, declining notably. The big moves were Monday, Wednesday, and Friday.
Spot WTI fell almost a buck and half Monday on unexpectedly weak existing home sales and disappointing corporate earnings. WTI fell $2 per barrel on Wednesday on rise in domestic production of oil and on report of Chinese manufacturing contracting. Crude declined a dollar a barrel on Friday on the announcement that China ordered more than 1,400 companies in 19 industries to cut excess production capacity this year.
Net for the week, the spot price for West Texas Intermediate dropped $3.58 per barrel to settle at $104.70.
News on the housing sector was mixed but mostly positive. The big question is whether higher mortgage rates cut into sales or rushed sales. The answer was mixed in June as mortgage rates firmed on worries about early Fed tapering of long-term asset purchases. Meanwhile, the manufacturing sector also was mixed but the consumer sector seems to be brightening a bit.
 In June, existing home prices firmed and a little bit more supply came into the market. But the bad news is that sales of existing homes slowed to a 5.08 million annual rate in June from 5.14 million the month before. This was a 1.2 percent drop after a gain in May of 3.4 percent.
The June dip could be due to higher mortgage rates or could simply be fall back from a strong May number.
But prices continued to rise, up 5.5 percent for the median to $214,200 and up 4.0 percent on the average to $261,100. Year-on-year price growth was in the low double digits for the median and in the high single digits for the average. These price data are not derived from repeat transactions and are subject to substantial volatility.
A few more sellers are putting their homes on the market, helping to ease what is still a noticeable lack of supply that is holding down sales. In monthly terms, supply is at 5.2 months at the current sales rate versus 5.0 months in May. One positive, especially for sellers, is that houses are not staying on the market very long at all, at 37 days in June versus 41 in May.
A lack of distressed properties is one major reason behind the tight supply with related sales at only 15 percent in the month for the lowest reading since this number has been tracked beginning in 2008. Foreclosures made up only 8 percent of the month's sales.
 The new home sales report was positive for June—in contrast to the existing home sales report.
Most of the fundamentals right now for the new home market are very favorable especially low supply which, despite constraining current sales, points to rising construction and possibly rising sales ahead. New home sales in June were at a new recovery high, at an 497,000 annual rate in June, compared to 459,000 in May for an 8.3 percent surge in June after a 1.3 percent rise the month before.
The availability of new homes on the market is extremely tight, at only 3.9 months at the current sales rate.
Prices have been very strong in the home market though the new homes report showed a second month of sharp declines on the new home side, down 5.0 percent for the median to $249,700 and down 4.0 percent for the average to $295,000. But the year-on-year rates, in the high single digits for both, are very respectable and in line with other home price readings. Importantly, new home price data are volatile because they are not based on repeat transactions.
 House prices continue to rebound. The FHFA house price index for May advanced 0.7 percent after gaining 0.5 percent in April. The consensus forecast a 0.8 percent increase. The May HPI change marked the 16th consecutive monthly price increase in the purchase-only, seasonally adjusted index. The U.S. index is 11.2 percent below its April 2007 peak.
The May increase was led by the South Atlantic region, increasing 1.8 percent. The weakest was the East South Central region which slipped 1.5 percent. Six of nine Census regions showed gains in the latest month; two declined; and one was flat.
The year-on-year rate for May posted at 7.3 percent, matching the April pace.
Overall, the housing sector continues to make moderate progress. The rise in home prices is favorable for the overall recovery as this will bring more supply to the housing market and add to consumer confidence.
 The manufacturing sector was still sluggish in June with aircraft and motor vehicles being notable exceptions.
Durables orders in June surged 4.2 percent, following an upwardly revised 5.2 percent for May. The transportation component spiked 12.8 percent after a 14.8 percent jump in May. Excluding transportation, durables orders were unchanged in June, following a 1.0 percent rise in May.
Unfilled orders, however, suggest some overall continuing momentum for manufacturing. Overall unfilled orders jumped 2.1 percent in June, following a 1.1 percent increase in May. This was mostly aircraft but non-transportation was still respectable. Unfilled durables excluding transportation increased 0.9 percent in June, matching the May pace.
Turning back to new orders data, within transportation, motor vehicles gained 1.3 percent, nondefense aircraft jumped 31.4 percent, and defense aircraft increased 18.7 percent. Outside of transportation, components were mixed but net zero. Gains were seen in fabricated metals, machinery, and "other." Declines were seen in primary metals, computers & electronics, and electrical equipment.
Nondefense capital goods orders excluding aircraft continued to rise. This series rose 0.7 percent, following a 2.2 percent boost in May. However, shipments for this series declined 2.0 percent, following a large 6.1 percent surge the month before.
Outside of aircraft, manufacturing appears to have been sluggish in June although following moderate strength in May. But unfilled orders indicate a modest recent upward trend in manufacturing. The emphasis is on “modest” although there are mixed signals from recent manufacturing surveys.
Markit's U.S. manufacturing survey reported moderately strong monthly growth so far in July with the composite index at 53.2, up from 51.9 in the final June reading and compared with 52.2 in the mid-month June reading. New orders were positive, at 55.1 to show the best monthly growth since March. New export orders were a standout, at 52.3 for a big 6 point gain that points to a rebound in global demand. Backlog orders are also up as is output and, importantly, employment.
 Unlike rising activity in the New York and Philly manufacturing zones, activity in the Richmond Fed District contracted in July. The Richmond Fed's index slid to minus 11 from June's plus 7.
Both new orders and shipments showed substantial contraction, each at minus 15. Backlog orders and capacity utilization were both down while inventories of finished goods were up which, given the declines in other readings, is a another likely indication of weakness. Employment and the workweek are both flat.
 Manufacturing activity in the Kansas City District rose moderately from last month, although producers' expectations for future activity eased somewhat. Price indexes were mixed, with a reduction in future materials prices but a slight increase in future selling prices.
The month-over-month composite index was 6 in July, up from minus 5 in June and 2 in May. Production increased at both durable and non-durable goods-producing plants, particularly in food, machinery, and aerospace products. Most other month-over-month indexes also improved. The production index increased from minus 17 to plus 21, its highest level since June 2011, and the shipments and new orders indexes also rose markedly. In contrast, the order backlog index edged lower from minus 4 to minus 7, and the employment index also eased slightly. The finished goods inventory index fell from 6 to 1, while the raw materials inventory index was unchanged.
Most future factory indexes moderated somewhat in July but still remained relatively solid.
 While housing and manufacturing are oscillating, the consumer sector is gaining traction, albeit gradually. Consumer spirits are at their best level of the recovery. Consumer sentiment ended July at 85.1 which is the best reading since July 2007. And the implied reading for the last two weeks is even higher, around the 86 area based on the difference between the final reading and the mid-month reading which was at 83.9.
 The balance between the two components of the headline composite index showed a little bit more strength in current conditions. Though the current conditions index, at 98.6, is up a very convincing 4.8 points from June, it shows a little bit of a fall-off from mid-month, suggesting that the month's strength was centered in the early part of the month which hints at a little bit of limited momentum going into August.
The expectations index, at 76.5, has been higher several times this recovery and it too is down a little bit from mid-month. The limited strength here may hint at concerns over future income that may be tied in part to the rise underway in gasoline prices.
But inflation expectations are still contained with the 1-year outlook at 3.1 percent, which is up only 1 tenth from June, while the 5-year outlook is actually down 1 tenth at 2.8 percent.
Overall, the consumer sector appears to be improving despite the recently disappointing retail sales report which likely had some weather related effects and technical issues on auto sales. The spending portion of the upcoming personal income report is likely going to be more favorable than the June retail sales report.
The characterization of the economy is obvious—it is mixed but progressing modestly overall. Housing has become a little uncertain due to rising or perhaps to expectedly rising mortgage rates. Housing may get a boost in the very immediate near term due to a rush in sales to beat higher pending rates. But there could be slippage later as higher rates make qualification somewhat more difficult. Taking into account the two-handed economist view, improvement in the labor market could offset modestly higher mortgage rates. Manufacturing is sluggish outside of aircraft and auto due to recession in Europe and soft domestic demand. But the consumer is a little upbeat despite higher gasoline prices. Apparently, it is all relative. Times are good compared to 2008.
This week’s highlights are the Fed’s FOMC statement and Friday’s employment situation report for July. Traders are still sensitive to the possibility of Fed announcing a tapering of asset purchases in September. Guidance in this week’s policy statement could indicate increased or decreased probability of September tapering. Jobs growth has improved but remains soft. Also, the unemployment rate remains elevated. A move down in the unemployment rate could add to speculation of early tapering by the Fed.
The pending home sales index jumped 6.7 percent in May, following a 0.5 percent dip in April. The May index level of 112.3 was the highest since the boom days of 2006. The year-on-year gain for the index is 12.1 percent, which is interestingly right in line with low double-digit gains for many home-price readings. The rise in mortgage rates that began in May appears to have lifted sales on fears that rates and prices would go up in coming months.
Pending home sales Consensus Forecast for June 13: -1.4 percent
Range: -3.5 to +2.5 percent
The Dallas Fed general business activity index in its Texas manufacturing survey for June rose to 6.5 after posting negative readings in April and May. The company outlook index soared 20 points to 13.3, reaching its highest level in 16 months. The production index, a key measure of state manufacturing conditions, rose six points to 17.1, posting its highest reading in more than two years. Notably stronger manufacturing activity was reflected in other survey measures as well. The new orders index climbed to 13 in June, a level not seen since July 2011. The capacity utilization index rose to a two-year high, jumping from 6.4 to 15.3. The shipments index advanced 12 points to 15.4. The company outlook index soared 20 points to 13.3, reaching its highest level in 16 months.
Dallas Fed general business activity index Consensus Forecast for July 13: 6.4
Range: 0.0 to 10.0
The S&P/Case-Shiller 20-city home price index (SA) was up 1.7 percent in April alone and followed a 1.9 percent jump in March. The year-on-year rate was notably strong, at plus 12.0 percent. Gains swept across all cities without exception with strength centered in the West where monthly gains are nearing 3 percent with year-on-year gains reaching 20 percent.
The S&P/Case-Shiller 20-city HPI (SA, m/m) Consensus Forecast for May 13: +1.3 percent
Range: -1.2 to +2.2 percent
The S&P/Case-Shiller 20-city HPI (NSA, m/m) Consensus Forecast for May 13: +2.0 percent
Range: +1.3 to +2.9 percent
The S&P/Case-Shiller 20-city HPI (NSA, y/y) Consensus Forecast for May 13: +12.3 percent
Range: +10.5 to +12.6 percent
The Conference Board's consumer confidence index was at a recovery best, at 81.4 in June and up nearly 7 points from a revised 74.3 in May for the third straight strong gain. The assessment of the present situation is also up for a third straight month, at a recovery best 69.2 which hints at general strength for the slate of June indicators. But the gain here does mask a small uptick in those who say jobs are hard to get, now at 36.9 percent for a 5 tenths increase that does not point to new gains for the June employment report.
Expectations were also at a recovery best, up nearly 9 points to 89.5 and reflecting rising confidence in the long-term outlook for the jobs market.
Consumer confidence Consensus Forecast for July 13: 81.0
Range: 77.0 to 83.0
ADP private payroll employment showed significant month-to-month improvement in job growth, to a still moderate 188,000 for private payrolls in June versus a slightly revised and less than moderate 134,000 gain in May. The BLS estimate for private payrolls in June posted at a gain of 202,000.
ADP private payrolls Consensus Forecast for July 13: 179,000
Range: 140,000 to 215,000
GDP growth for the first quarter was unexpectedly revised down significantly. Growth posted at 1.8 percent for the third estimate versus the second estimate of 2.4 percent. The biggest downward revision was to personal consumption. Final sales of domestic product came in with a revised gain of 1.2 percent versus the second estimate of 1.8 percent. Final sales to domestic producers (which exclude net exports) were bumped down to 1.3 percent for the third estimate from the prior estimate of 1.9 percent. Headline inflation for the GDP price index was nudged up to 1.2 percent from the second estimate of 1.1 percent. When excluding food and energy, inflation was revised to 1.7 percent, compared the previous estimate of 1.6 percent. Finally, this month’s report includes annual revisions.
Real GDP Consensus Forecast for advance estimate Q2 13: +1.1 percent annual rate
Range: +0.4 to +2.0 percent annual rate
GDP price index Consensus Forecast for advance estimate Q2 13: +1.1 percent annual rate
Range: +0.4 to +1.6 percent annual rate
The employment cost index for civilian workers in the first quarter rose a quarterly 0.5 percent, following a 0.4 percent gain in the fourth quarter. Wages & salaries rose 0.5 percent was on the high side for this series and compares with 0.3 percent gains in the two prior quarters. These numbers reflect corrections by the BLS after the initial release.
Employment cost index Consensus Forecast for Q2 13: +0.4 percent
Range: +0.3 to +0.6 percent
The Chicago PMI slowed sharply in June, coming in at 51.6, down 7.1 points from May. Big moves are not unusual for this index but a look at the details points to solid growth with new orders coming in at a very respectable 54.6 to indicate healthy monthly growth though down from an outsized 58.1 in the prior month. Production rose solidly, but again at a slower rate, while employment picked up in the month. A big contraction in backlog orders was a negative in the report.
Chicago PMI Consensus Forecast for July 13: 54.0
Range: 52.0 to 56.0
The FOMC announcement at 2:00 p.m. ET for the July 30-31 FOMC policy meeting is expected to leave policy rates unchanged with the fed funds target at a range of zero to 0.25 percent. Attention will be focused on guidance and the characterization of the economy. Traders still worry about potential tapering of asset purchases this year. Outright commentary on asset purchases is a possibility. Also, comments on the economy likely will affect traders’ views on probabilities of early tapering.
FOMC Consensus Forecast for 7/31/13 policy vote on fed funds target range: unchanged at a range of zero to 0.25 percent
Sales of total light motor vehicles in June moved higher, up 4.2 percent in June to a recovery best annual rate of 16.0 million units. June's strength was split evenly between cars and trucks and also between imports and domestic-made, with the latter coming in at a 12.6 million rate. These results are impressive and point to the strength of the consumer and to a third straight big gain for the motor vehicle component of the monthly retail sales report which surged 1.8 percent in May.
Motor vehicle domestic sales Consensus Forecast for July 13: 12.4 million-unit rate
Range: 12.4 to 12.5 million-unit rate
Motor vehicle total sales Consensus Forecast for July 13: 15.8 million-unit rate
Range: 15.6 to 16.0 million-unit rate
Initial jobless claims rose 7,000 in the July 20 week to 343,000 with the 4-week average down slightly to 345,250. The trend for the data is flat, pointing to no discernible improvement underway in the jobs market. Once in a while continuing claims, which are reported with a 1-week delay, get some attention and that may be the case for the latest report as the reporting period, the week ending July 13, is also the sample week for the monthly employment report. And the data for the week show big improvement with a 119,000 decline to 2.997 million. But the decline only partially reverses big increases of 93,000 and 70,000 in the prior two weeks and leaves the 4-week average at 3.022 million which is still more than 40,000 higher than the month-ago comparison. July is the time that automakers shut down their factories for retooling and put their workers on leave, which brings into play major adjustment issues and substantially clouds the data.
Jobless Claims Consensus Forecast for 7/27/13: 345,000
Range: 340,000 to 350,000
The Markit PMI manufacturing flash index in July came in at 53.2, up from 51.9 in the final June reading and compared with 52.2 in the mid-month June reading. New orders were very positive, at 55.1 to show the best monthly growth since March. New export orders were a standout, at 52.3 for a big 6 point gain that points to a rebound in global demand. Backlog orders were also up as was output and, importantly, employment.
Markit PMI manufacturing index (final) Consensus Forecast for July 13: 53.1
Range: 52.1 to 53.5
The composite index from the ISM manufacturing survey for June posted at 50.9 to indicate slight growth from what was a weak May at 49.0. But new orders were the big highlight in the report, up more than 3 points to 51.9—although the latest reading was still only marginally positive. And unlike the PMI manufacturing report, the ISM report shows improvement for new export orders at 54.5 compared to 51.0 in May. For June, production picked up as did imports. Other factors are mixed with employment weak, at 48.7, and with other readings flat including inventories, delivery times, and prices.
ISM manufacturing composite index Consensus Forecast for July 13: 53.1
Range: 52.1 to 53.5
Construction spending was mixed in May with divergent movement in the private sector and the public sector up. Construction outlays advanced 0.5 percent in May after rebounding 0.1 percent in April. The May boost was led by a 1.8 percent rebound in public outlays after a 0.2 percent dip the month before. In the private sector, residential spending gained 1.2 percent, following a 0.1 percent decrease in April. Multifamily spending was up sharply, 2.5 percent on the month, but single-family was up somewhat less, 0.4 percent. Weakness was centered in nonresidential outlays which fell 1.4 percent after a 0.6 percent rise.
Construction spending Consensus Forecast for June 13: +0.4 percent
Range: -0.4 to +0.7 percent
Nonfarm payroll employment June increased 195,000 after rising 195,000 in May. The net revisions for April and May were up 70,000. The unemployment rate held steady at 7.6 percent. Turning back to payroll data, private payrolls gained 202,000 after rising 207,000 in May. There was a notable monthly improvement in wages. Average hourly earnings jumped 0.4 percent in June after a modest 0.1 percent rise the month before. The average workweek was 34.5 hours, equaling the number for May
Nonfarm payrolls Consensus Forecast for July 13: 175,000
Range: 150,000 to 203,000
Private payrolls Consensus Forecast for July 13: 187,000
Range: 163,000 to 205,000
Unemployment rate Consensus Forecast for July 13: 7.5 percent
Range: 7.4 to 7.6 percent
Average workweek Consensus Forecast for July 13: 34.5 hours
Range: 34.4 to 34.5 hours
Average hourly earnings Consensus Forecast for July 13: +0.2 percent
Range: 0.0 to +0.2 percent
Personal income in May gained 0.5 percent after a 0.1 percent rise in April. The wages & salaries component advanced 0.3 percent, following a 0.1 percent increase. Consumer spending rebounded 0.3 percent in May, following a 0.3 percent drop the month before. Headline inflation was soft with a 0.1 percent rise after declining 0.3 percent in April. The core inflation rate gained 0.1 percent in May, following no change in April. Market expectations were for a 0.1 percent rise. Looking ahead, private aggregate earnings jumped 0.6 percent in June in the employment report and suggest a sizeable increase in the private wages & salary component of the personal income report. The spending component is likely to be moderately healthy based on durables and nondurables. Unit new motor vehicle sales jumped a monthly 4.2 percent in June to a recovery best annual rate of 16.0 million units. From the June retail sales report, gasoline sales increased 0.7 percent. PCE inflation is likely to be on the warm side as the June headline CPI surged 0.5 percent and the core increased 0.2 percent. Finally, this month’s report includes annual revisions.
Personal income Consensus Forecast for June 13: +0.4 percent
Range: +0.2 to +0.7 percent
Personal consumption expenditures Consensus Forecast for June 13: +0.4 percent
Range: +0.1 to +0.6 percent
PCE price index Consensus Forecast for June 13: +0.4 percent
Range: +0.2 to +0.4 percent
Core PCE price index Consensus Forecast for June 13: +0.1 percent
Range: +0.1 to +0.2 percent
Factory orders rose 2.1 percent in May following a revised 1.3 percent rise in April. But commercial aircraft orders, which are always volatile month-to-month, skewed the results higher. Excluding transportation equipment, new orders rose 0.6 percent in May, following a 0.2 percent gain in April. Shipments, where activity has also been uneven, rose 1.0 percent in May but followed declines in the prior two months of 0.7 percent and 1.5 percent. Shipments of non-defense capital goods excluding aircraft, which is a reading used to gauge business expansion, nearly reversed a 2.1 percent April decline with a 1.9 percent gain in May. More recently, durables orders in June surged 4.2 percent, following an upwardly revised 5.2 percent for May.
Factory orders Consensus Forecast for June 13: +2.3 percent
Range: +0.5 to +3.0 percent
R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books.
Econoday Senior Writer Mark Pender contributed to this article.
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