STOCKS RISE ON EARNINGS & GREECE

Stocks surged in an action-packed week, giving the NASDAQ two record closes in a row. For the week, the S&P 500 gained 2.41%, the Dow rose 1.84%, and the NASDAQ soared 4.25%.^[1]

Investors around the world breathed a sigh of relief when EU negotiators finally reached a deal on Greece after weeks of brinksmanship. However, all is not won yet since the deal must pass several Eurozone parliaments next and Greece must apply for a new International Monetary Fund (IMF) program.^[2] But, the European Central Bank approved more emergency relief and Greek banks are due to reopen this week.^[3] Will this new bailout resolve all of Greece’s issues? Certainly not. In fact, we may see new acts in the Greek drama if a snap general election is called this fall or if the IMF refuses to support the deal.^[4] However, Europe avoided a painful Greek exit and Greece has stepped back from the brink (for now).

On the U.S. side, earnings season really got going last week; despite some outsized performance from a few companies, earnings have gotten off to a lukewarm start, with early results suggesting that revenues may be weaker than what we saw in the first quarter. However, financials are showing strength and some standouts in the tech sector drove the NASDAQ to new record closes.^[5] Shares from technology giant Google (GOOGL) skyrocketed on strong earnings, giving the stock the biggest one-day rally in history.^[6]

In other news, Federal Reserve Chair Janet Yellen testified before House and Senate committees last week, reiterating the Fed’s commitment to raising rates later this year. Though Yellen is comfortable with the improvement shown by the labor market, she wants to be cautious about the timing of interest rate hikes to avoid stalling the economic recovery.^[7]

Looking ahead, earnings season will continue heating up this week, giving analysts piles of new reports to digest. Investors will also take a look at more housing data to gauge how the sector looks this quarter. Though summer is often a sleepy time for markets, recent events are keeping traders close to home and we may see more volatility in the coming weeks.

ECONOMIC CALENDAR:

Wednesday: Existing Home Sales, EIA Petroleum Status Report
Thursday: Jobless Claims
Friday: PMI Manufacturing Index Flash, New Home Sales

_{Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.}HEADLINES:

Jobless claims fall more than expected. After three weeks of increases, the number of Americans filing new claims for unemployment benefits fell. Summer jobs data tends to be volatile, but the drop is a sign of health for the labor market.^[8]

Inflation rises in June. The cost of consumer goods rose for a fifth straight month in June, driven upward by rising gasoline and other costs. This increase supports the Federal Reserve’s plan to raise interest rates this year.^[9]

Housing starts rebound in June. Groundbreaking on new homes increased by 9.8% last month and new permits rose, boosting expectations of a housing market resurgence this year.^[10]

Retail sales decline. U.S. retail sales unexpectedly slipped last month as Americans cut back on major purchases like autos and home goods. Though the decline could be seasonal, it raises worries that the economy might be lagging.^[11]

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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

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The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.

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