By Mike Keerma
Deep into the summer doldrums, the major North American markets turned in humdrum performance last week, as early strength in July following June’s Brexit
vote in the U.K gave way to general indifference. Despite lacklustre performance over the last two weeks of the month, the S&P/TSX Composite Index advanced a relatively healthy
3.7% in July, but closed last week with a marginal weekly loss of -0.1% on declining crude oil prices. Likewise, the S&P 500 Composite Index edged down fractionally on the
week, despite closing last Friday with its second-highest close ever, for weekly loss of 0.07%, while turning in another strong monthly gain of 3.6%. The Nasdaq Composite Index followed suit, as a 1.2% advance on
the week sealed the deal for a monthly gain of 6.6%, as technology shares rallied following Alphabet Inc.’s (NASDAQ: GOOG) better-than-expected
quarterly earnings report.
In the U.S., second-quarter gross domestic product expanded by a lackluster 1.2% year-over-year, putting paid to any hopes for a strong rebound from the
first quarter’s equally lackluster 0.8% growth rate. Falling inventory levels accounted for much of the weakness in the second quarter. One positive sign
was a 4.2% increase in consumer spending with both goods and services showing healthy growth. Taken together, these factors augur well for a resumption of
GDP growth in the second half of the year.
The U.S. Federal Reserve Board’s Open Market Committee (FOMC) held interest rates unchanged, pretty much as expected, acknowledging that near-term risks to its
projections for the economy have dropped slightly. Perhaps burned by its recent flip-flops on the rate outlook, the FOMC toed the party line, keeping the
tone of its its commentary quite neutral, suggesting that any rate hike has probably been deferred to December at the earliest.
Canadian GDP for May put on an equally lacklustre showing, as output fell -0.6% from April, growing at an annual rate of only 1.0%. Those late spring
wildfires in Fort McMurray put a crimp in Alberta’s crude oil production, with falling durable goods production and weaker exports also weighing on GDP for
In company news, the tech sector got a boost last week as Google’s parent company Alphabet Inc. (NASDAQ: GOOG) reported second-quarter
earnings of US$8.42 per share on revenues of US$21.5 billion, overpowering street estimates of some US$8.04 per share and revenues of US$20.76 billion. The
company attributed its earnings growth to continued investment in high-growth areas such as mobile and video.
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