June 22nd, 2015 10:57 AM by Mel Samick
The stock markets were feeling special too this past week. There was a rise in indices across the board as investors welcomed dovish signals from the Federal Reserve and managed to contain worries about the stalled Greek debt negotiations. The Nasdaq Composite, S&P MidCap 400, and the Russell 2000 Indexes all established new highs on Thursday, with the technology-heavy Nasdaq finally surpassing the intraday record it established in March 2000. The Dow ended a little above the 18K mark for the Friday close.
"One and done" (for now) seems increasingly likely. The major market driver appeared to be the Fed's policy meeting on Wednesday. Investors were pleased that policymakers left official short-term interest rates near zero, although this was largely expected. The shift raised the likelihood of a "one and done" scenario in which the Fed will raise interest rates slightly and then pause to see what the effect will be on financial markets and the economy. Meanwhile, the Greece stalemate may have limited the market's gains. Gains on Wall Street might have been stronger if not for the ongoing Greek debt negotiations, which saw little constructive progress during the week. There’s news that Greek depositors had pulled €3 billion between Monday and Thursday from the Greek banking system, which some worry will collapse if a deal is not reached soon.
The Bond markets saw prices of U.S. Treasury bonds rally, driving yields lower for the week, as increasing concerns that Greece will default on its debt seemed to drive demand for safe-haven assets such as Treasuries. Treasuries also benefited from the release of the Federal Reserve's Summary of Economic Predictions (SEP) following the Central Bank's policy meeting, where it kept interest rates at their current low levels. The U.S. Government 10-year Treasury closed at 2.26 percent.
Some other interesting things shaping the market - out-of-pocket increases in health care spending are benefiting some firms, challenging others. Another persistent pattern in the market has been the boost provided by merger and acquisition (M&A) activity. The week's deals were smaller than in some recent months, but they occurred across a range of industries, including pharmacies, automotive parts, and homebuilding. Consolidation speculation within the health care insurance industry also intensified. There’s an increasing trend that consumers are becoming more rational in their use of health care due to increasing out-of-pocket expenses, which creates challenges for some health care firms, but helps managed care firms and others that benefit from lower health care utilization.
Major economic market movers like U.S. housing starts fell 11.1% in May to a seasonally adjusted annual pace of 1.04 million units. However, permits for future home construction rose 11.8% to 1.28 million units per year, the highest since August 2007. These are good indications of growing strength in the housing industry. Meanwhile, U.S. consumer prices rose 0.4 percent in May, the most in two years, driven by a 10.4 percent increase in gasoline prices. Overall prices were unchanged from a year earlier, while core prices rose 1.7 percent. The job report showed that-Initial Jobless Claims fell 12,000 to 267,000 for the week ended 13 June, the fifteenth straight week below 300,000.
Interest rates will remain volatile due to Greek debt issues and the pace of growth in the economic markets around the globe. If you are purchasing a home getting a rate lock is important to protect you from this up and down market place.
Information Provided by NYCB Capital Markets