After reaching record highs in the first half of the year U.S. equity markets have met some resistance. Instead of pushing towards 18,000 for the Dow Jones Industrial Average and 2,000 for the S&P 500, indexes retreated this week. It appears markets have met their high resistance level following a strong June employment report from ADP and the Bureau of Labor Statistics. The DJIA was down 0.7% and the S&P 500 was down 0.9% for the July 11 week.
On Wednesday the FOMC released its June meeting minutes which reinforced its position on federal funds rate changes and QE3 tapering. The FOMC will likely end QE3 asset purchases in October 2014. Federal funds rate policy changes are likely to follow in mid-2015. The DJIA was up 0.47% for the day while the S&P 500 gained 0.46% following the release of the report.
On Friday Wells Fargo (WFC) began the financial sector’s second quarter earnings reports. The bank reported $21.07 billion in revenue, net income of $5.73 billion and EPS of $1.01. The earnings report was on track with analysts’ consensus which estimated EPS of $1.01 and revenue of $20.84 billion. Despite the on target earnings report the bank’s stock fell 0.62% for the day as broad markets fell and analysts reported concerns over the bank’s decreasing net interest margin.
In the Dow Jones Industrial Average JPMorgan (JPM) and Goldman Sachs (GS) are scheduled to release earnings next week on July 15. In the financial sector banks continue to struggle with ongoing regulatory tightening and pending litigations. The S&P 500 financial sector was down 1.52% for the week and up 0.18% Friday.
Next week a few significant measures of the U.S. economy’s gross domestic product output will be released. Retail sales are slated for Tuesday, July 15, industrial production Wednesday, July 16 and housing starts on Thursday, July 17. These releases could provide some key insights into the economy’s second quarter GDP reading which will be released on July 30.