Stocks ended the week lower in the U.S. and around much of the world after the central banks in the U.S. and Japan chose to hold off on tightening, or loosening, their monetary policies. Meanwhile, the ongoing drama of the U.K.’s European Union referendum took a sad turn when a British politician was murdered. The parties on both sides of the debate halted their campaigning for a day following the tragedy, but there have been no indications that the planned “Brexit” vote, scheduled for this coming Thursday, will be pushed back.
MACRO NEWS: In central bank news, the Federal Reserve left the funds rate unchanged, as universally expected. New projections released by the Fed show officials expect the funds rate to rise to 0.875% by the end of 2016. The median forecast implies two rate increases this year, which is the same as implied when projections were last released in March. However, six officials now see only one increase this year and only two see three or more. Previously, only one official saw one rate increase this year and seven saw three or more. The Bank of Japan kept policy on hold, as was widely expected. However, markets expressed disappointment with the decision, sending Japan’s Nikkei index down over 3% on Thursday…
In the U.S., retail sales increased 0.5% in May, versus expectations for a 0.3% increase. The core reading, removing autos and gas, was up 0.3%, matching the consensus forecast. Import prices climbed 1.4% in May, with export prices up 1.1%, both of which were stronger than expected. An index of producer prices rose 0.4% in the month of May, versus expectations for an increase of 0.3%. The core PPI reading, which removes food and energy, rose 0.3%, versus expectations for an increase of 0.1%. The Empire manufacturing report had a reading of 6.01 for June, versus the expected reading of -4.90. Industrial production fell 0.4% in May, knocking capacity utilization down to 74.9%. Both were worse than the 0.2% decline and 75.2% rate that were expected. An index of consumer prices rose 0.2% during May, versus expectations for an increase of 0.3%. The core reading, which removes food and energy, rose 0.2%, matching expectations. Initial jobless claims came in at 277,000 last week, versus the expected 270,000 first-time claims. The current account balance showed a deficit of $124.7B in Q1, versus expectations for a budget shortfall of $125B. The Philadelphia Fed business survey had a reading of +4.7, versus expectations of +1.0. The National Association of Home Builders’ sentiment index rose 2 points to 60 in June, a point better than forecast. Housing starts were reported to have dipped 0.3% to 1.164M in May, which was a bit better than forecast. Building permits rose 0.7% to a 1.138M rate last month…
