It’s been another day with a rush of earnings announcements, mostly upbeat, and another day in which the Dow Jones Industrial Average has set a new all-time high.
By Peter Martin
Tuesday, July 15, 2014
But by afternoon in New York, stock prices had retreated, leaving the leading index benchmarks mixed, after Fed Chair Janet Yellen signalled some concern over the frothy nature of some asset prices.
‘Valuation metrics in some sectors do appear substantially stretched,’ said Ms Yellen in prepared remarks delivered to the Senate Banking Committee, ‘Particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year.’
Biotechnology and social media stocks were the hardest hit, pushing the NASDAQ 100 down 0.30% to 3917.9, while the S&P500 slid 0.11% to 1974.9. The Dow Jones Industrial Average, boosted by better-than-expected second-quarter earnings from index components JP Morgan and Goldman Sachs, was flat at 17,056, having climbed as high as 17,120.34 earlier to set an intraday record. Johnson & Johnson, the other Dow component to have reported today, slid more than 1% after failing to meet expectations for earnings, though the company did see a healthy growth in both earnings and revenue compared to the same period a year ago and raised its full-year earnings guidance. Intel and Yahoo report after the market closes.
Despite Ms Yellen’s warning about valuations, her comments remained largely dovish, reiterating her belief that ‘significant slack remains in labor markets’ and that highly accommodative monetary policy therefore remains appropriate.
Macroeconomic data today has been somewhat mixed. Retails sales continued to grow in June, though the rate of increase was less than expected. Sales rose 0.2% last month, undershooting expectations of a 0.6% gain, but there was also an upward revision from +0.3% to +0.5% for April’s data. Things look a little better at the core level, excluding autos and gasoline, with a 0.4% increase in receipts, though this still undershot expectations slightly.
Manufacturing activity has accelerated in the New York region, according to the New York Fed’s latest survey, which will spur hopes for nationwide manufacturing levels this month. The Empire State Manufacturing Index surged to a level of 25.60 in July from an already impressive reading of 19.28 in June. New orders advanced from 18.36 to 18.77, which bodes well for production levels going forward and, judging by this report, manufacturing continues to lead the economy.
In the forex market, the pound resumed its upward march against the dollar today, gaining 0.36% to 1.7145 after UK CPI data showed a surprise inflation increase for last month, with consumer prices rising 0.2%, versus a consensus estimate for a 0.1% fall. GBP/USD hit 1.7192 earlier in the day, its highest level since October 2008.
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