As Q2 ended, markets hit a six-week volatility high. While the tech sector declined during the week, consumer discretionary and industrial sectors drove stocks higher on Friday. On Friday, the tech-heavy NASDAQ slumped 1.99%. The S&P fell 0.61% and the DOW dropped 0.21%. Globally, European markets and most of the Asian markets finished the week down.
The Fed reported during the week that the largest U.S. banks passed the stress test evaluating their financial soundness. The test results indicate that banks have the capital structures to withstand difficult economic times. In addition, the results gave banks a green light to pay shareholders dividends and engage in share buybacks.
Other Market News
- Q1 Gross Domestic Product Numbers Go Up: The Q1 GDP estimate improved to 1.4% on an annualized basis. Previous estimates were 1.2% and 0.7%. Consumer spending was also revised upward to 1.1% from previous estimates of 0.6% and 0.3%.
- Durable Goods Orders Fell: Weakening commercial aircraft sales contributed to a 1.1% fall in May's durable goods orders. Core capital goods also fell 0.2%, surprising expectations for a 0.5% increase.
- Consumer Confidence and Sentiment Rise: Consumer confidence exceeded expectations by 2 points in June as individuals who reported that jobs are difficult to find fell by 0.3%. The Consumer Sentiment Index rebounded in the second half of June to 95.1, but remains less than May's 97.1 reading.
- Pending Home Sales Weaken: Despite an expected 0.5% gain, pending home sales dropped 0.8% in May. The 3-month run of slowing sales suggests a weakening housing sector.
- Home Price Index Softens: The Home Price Index fell from an annual increase of 5.9% to 5.7% year-over-year. This index reflects monthly changes in housing prices over 20 metropolitan regions. San Francisco, Boston, and Cleveland all reported lower housing price data.
- Oil Prices Climb: Although oil prices ended last Friday at $46.04 a barrel, oil closed the first-half of the year down 14%, its weakest performance since 1998. Ongoing concerns about an oversupplied market continue to influence investors despite a dip in U.S. production slowing the bearish outlook.
- Import/Export Data Modestly Brightens: Imported goods dropped to $193 billion and exports improved to $127.1 billion in May. While the $65.9 billion difference remains significant, this quarter's goods gap is averaging $66.5 billion a month.
- The Dollar Drops: Though marginally recovering on Friday, the U.S. dollar reported its largest quarterly decline in almost 7 years against other major currencies.
During the shortened trading week, the markets will look at manufacturing indices, motor vehicle sales, and employment data reports. As the data becomes available, investors will focus on how Q2 numbers roll out and what might be developing for the rest of the year.
As you reflect on this data and the week ahead, feel free to contact us should questions arise. We are here to serve your complete financial goals and help you navigate your investing choices.
Quote of the Week
"A thankful heart is not only the greatest virtue, but the parent of all the other virtues."
--Cicero
Golf Tip of the Week
Practice Your Rhythm with the Driver
Losing control of your ball? Not solidly hitting? More than likely, you're hitting the ball with a backswing that's faster than your downswing. To improve your shot, you need to find your rhythm so you gain speed without sacrificing contact. In short, you need to finish your backswing.
Rather than strike the ball in a weak position that relies on your hands and arms, you need to wind up your power from behind the ball. The goal is to make sure your swing remains smooth and deliberate.
Fine-Tune Your Drive
To practice finding your rhythm, focus on your swing's speed and control with the following technique:
Step 1: Tee up three balls in a row.
Step 2: Hit the first ball.
Step 3: Step up immediately to the next ball, and hit it without pausing.
Step 4: Step up again, and immediately hit the next ball.
Step 5: Repeat the sequence, without taking breaks in between each swing.
This back-to-back practice will help you stay in balance without over-swinging and allow you to internalize your rhythm and flow. Concentrating on this feeling will enable you to hit more shots in the center of the clubface and maximize your speed.
Financial Question of the Week
What is the Small Business Health Care Tax Credit?
The Small Business Health Care Tax Credit is designed to help small business owners provide health care to their employees. It is worth up to 50% of the costs you pay for your employees' premiums (35% for non-profit employers).
To qualify for the tax credit, all of the following must apply:
- You have fewer than 25 full-time equivalent (FTE) employees
- Your average employee salary is about $50,000 per year or less
- You pay at least 50% of your full-time employees' premium costs
- You offer coverage to your full-time employees through the SHOP Marketplace. (You don't have to offer it to dependents or employees working fewer than 30 hours per week to qualify for the tax credit.)
The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit.