Market and economic update: Economic data could show signs of growth

Little in the way of economic data last week meant the market focused on news flow. Federal Reserve minutes from the June Federal Open Market Committee (FOMC) meeting held no significant surprises for the market but did provide some context around the Fed’s attitude toward data and the transition in monetary accommodation.

The start of second-quarter earnings releases offered no cause for celebration. Wells Fargo was the first bank to report, and mediocre loan growth sparked fears of economic stagnation. With second-quarter earnings on tap from banks this week, we will be watching the trend of loan activity.

The trend for capital spending is another economic indicator we are monitoring from the earnings reports. This factor has been relatively slow for a number of years, with companies choosing to redeploy capital by returning earnings to shareholders in the form of dividends and stock buybacks, rather than investing in their businesses. The improvements in the jobs market have led us to believe capital spending should pick up in 2014, providing additional lift to the U.S. economy.

More economic releases are expected this week. We will be watching retail sales for June as an indication of the health of the U.S. consumer in light of strong employment gains. The Fed’s Beige Book, a survey of Federal Reserve districts on economic activity, will be released in preparation for the July Fed meeting and may provide some indication as to the state of the U.S. economy.



Outside the United States, China will release major economic data for June and the second quarter, including gross domestic product growth, which may be a little slower than the 7.4% first-quarter pace, as well as details on recent loan and money supply growth. Data from China has been slower, but high-frequency economic data seems to point to a stabilization and modest improvement in economic activity.

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Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank. 

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