WILL THE UPSIDE SURPRISES CONTINUE?

June’s PPI rose by 0.5%, more than the forecasted 0.3% gain and the largest increase since May 2015.  April prices rose by 0.4%.  For the 12 months prices are up 0.3%, the biggest year to year gain since December 2014.

Excluding food and energy, prices climbed 0.4% following a 0.3% advance the prior month. These costs are up 1.3% from June 2015.

Last week, weekly jobless claims fell to the lowest level since April.

Treasuries tumbled on this data, the third selloff this week following an all-time low in yields reached on July 6.

Yesterday Goldman surprised the markets with their outlook of two interest rate increases by year end, further stating the upcoming Fed meeting may warn the markets that their monetary policy views are way to dovish.  Goldman’s evidence for this view was last week’s jobs data, today’s inflation statistics, the endless rally in stocks and the lack of negative response to Brexit.

If Goldman’s forecast is indeed accurate, how much of the recent two week 1,300 point advance be retraced.  As widely discussed, stock prices have surged from the belief of yet even more central bank stimulus, an advance amplified by cross correlated electronic based trading.

Today retail sales and the CPI are released.  Will OER continue to rise from depressed levels for the third consecutive month?  If so how will the bond market respond? Retail sales are also posted.

Second quarter earnings season resumes with three large financials posting results.  Yesterday JP Morgan increased expectations for the group given their upside surprise.  The behemoth bank was also a reason for the equity advance.

Last night the foreign markets were mixed.   London was down 0.43%, Paris down 0.91% and Frankfurt down 0.80%.  China was down 0.30%,  Japan was up 0.68%and Hang Sang up 0.46%.

The Dow should open nominally lower with many thinking the averages have gone too far too fast and are perhaps overvalued based upon current earning projections.  The 10-year is unchanged at 1.53%.

 

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.