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The Markets This Week

July 2, 2014 | Weekly Commentary

The past week saw the stock-market debut of a company called GoPro, which makes video cameras you can strap to your head. If investors strapped cameras to their heads to film the highs and lows of finance last week, no one would watch.

Trading remains subdued, and stocks mostly treaded water. The Dow Jones Industrials and Standard & Poor’s 500 fell slightly on the week, in reaction to more hawkish banter by Federal Reserve officials. The talk suggests the central bank might raise interest rates as soon as the first quarter of 2015, slightly earlier than investors have been expecting.

After closing at a new record high the previous Friday, the Dow finished the week down 0.6%, or 95 points, to 16,851.84. The S&P 500 index fell 1.9 points, to 1960.97. The Nasdaq Composite added 30 points, or 0.7%, to close at 4397.93.

Not even a miserable first-quarter reading on gross domestic product shook the market out of the doldrums. “It was horrific, worse than anyone expected,” Yousef Abbasi, global market strategist at JonesTrading Institutional Services, said of the 2.9% decline in first-quarter economic output. “But we were very quickly willing to excuse it.”

Abbasi focused instead on statements by Fed officials such as James Bullard, who indicated the Fed might raise interest rates in the first quarter of 2015. Bullard, president of the St. Louis Fed, doesn’t vote on the Federal Open Market Committee, the Fed’s policy-making arm, but he and other Fed officials appear to be more worried about an uptick in inflation than Fed Chair Janet Yellen, who dismissed the data as “noisy” the previous week.

Other data buoyed the Street. New-home sales spiked 18.6% in May, the largest gain in more than 20 years. Consumer-sentiment data released Friday was rosier than expected.

Investors await second-quarter results for more guidance. Quarterly results from S&P 500 companies such as General Mills (ticker: GIS) and Oracle (ORCL) have mostly proven uninspiring, says Zacks Investment Research. “These initial reports don’t inspire much confidence and appear to be pointing toward another underwhelming reporting season ahead,” wrote research director Sheraz Milan, while noting that it may be “premature to draw any firm conclusions.”

Nike (NKE), bucked the tide, however, by posting better-than-expected earnings late Thursday, seeing particular growth in its soccer division, where revenue rose 18%. It was a fitting end to a week when the U.S. men’s soccer team shocked most of the world by advancing in the World Cup.

Trading is likely to remain slow in the coming holiday-shortened week.

“The big players are all on vacation,” said Brad McMillan, chief investment officer for the Commonwealth Financial Network. “Keep an eye on any news that companies release on July 3. It will probably be something they want to bury.”

(Source: Barrons Online)

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