Market briefing --- Mate (slow)
Economists forecast --- June (slow)
NYSE --- Deb (fast)
Crude oil price --- Markt (slow)
>> welcome back to the “world financial report.” i’m matt nesto. the u.s. growth rate was slower than some economists forecast. june russo is here with the numbers and implications therein.
>> thanks, matt. that rate was the slowest in more than a year and the weakest pace of consumer spending since the 2001 he recession. rising energy prices led to the biggest drag on the economy -- consumer spending. it slowed to a 1% annual rate after a 4.1% gain the first three months. there is some concern about higher fuel prices cutting into retail sales and hurting the economy.
>> short-term obviously there is a worldwide supply tightness. if we don’t get any relief anytime soon, we’re going to see prices go up to 15, maybe higher, per barrel and that could have a real bad impact on the economy. the sad part about it is, what might finally bring energy prices down is when energy prices actually damage the economy.
>> inventories are building and the strong economy met more imports. business spending grew at an 8.9% rate. today’s report also contains the government’s annual revisions for g.d.p. statistics and this is one reason economists estimates may have been off the mark t. economy grew faster than expected in the first quarter. annual revisions mean the first quarter is now 4.5%, up from 3.9%. today’s report from the chicago purchasing managers shows business expanding at a fasters rate during july. the riegesal index rose to see 64.7% from 56.4% in june because of more orders, productions and a rise in backlogs and consumer confidences rose for a second straight month in july with a rebound in hiring. the university of michigan’s final index of consumer sentiment for july rose to 96.7, the highest all year. on consumer prices, the inflation measure closely wanted by the fed, the core personal consumption expenditures index rose 1.8%, slower than the first quarter. the measure is now within the central bank’s forecast. in a report, john ryding, bear stearns’ chief economist, said this report should in no way discourage the fed from raising rates a quarter point on august 10. matt?
>> thank you very much. interesting story, certainly. well, let’s talk about the numbers today. the markets , well, not only closed out on friday, they also close out the month. if you look at the dow, the s&p and the nasdaq, all inching higher today, the nasdaq the best of the three. the dow and the nasdaq, having a little surge at the bell, made those―well, turned some losses into tiny gains. the weekly story shows losses or shows gains, rather, for the first time in three, four, and five―four, five, and six weeks respectively for the nasdaq, dow, and s&p 500. if we look at the volume on the nyse today, you had just about 1.3 billion shares trading hands. on to bonds we go. nasdaq―there you go―now we go to the bonds. the bonds rallied. the best day for the 10-year note that we’ve seen in terms of the price in about two weeks. that pushes the yield, hovering close to a two-month low. similar gains for the five and two-year and if we look at the currencies here today, the dollar was mixed. so, you bought a little bit less yen for your dollar. the euro was down versus the dollar, nine days out of 10, and the pounds was up ever so slightly. well, the s&p snap add six-week losing streak. but for the month of july, a different story. that’s what i was trying to elaborate on earlier. deborah kostroun, i’m sure, will do a better job. deb?
>> well, it was kind of a poor performance for the major averages. in fact, so far this year, july has been the worst month so far. if you take a look at the dow, it was down 2.8%, the worst performance since january 2000 9 for the s&p and the nasdaq. that is their worst performance since december of 2002. seeing some pretty big losses. as we get into the month of august, of course that starts on monday with the trading day, so far, according to the stock trader’s almanac, august is the second worst month of the year for the dow since 1971. september is actually the worst month of the year for stocks. however, in august, during election years, they actually fare a little bit better. so we’ll have to see how the month of august does this year. semiconductors, we’ve been talking about them all throughout the month of july, namely because they were the worst performers. you can see what they’ve been doing over the past month, down almost 13%. however, this week, some of the best performers―in fact, for the past couple of days, semiconductor we have been talking about them being some of the best gainer, mainly because ties want semiconductor said earnings yesterday doubled and then you had kla-tencor saying earnings tripled and that helped out the sentiment as we’re closing out this month for semiconductors. but all in all, worst performers for the month on the s&p 500. as we get into next week, many traders focusing on the jocks report that we’re going to be getting next friday and then, of course, the feds, they will be meeting on august 10 and give us more insight into possibly raising those interest rates again. energy stocks winners once again throughout the week. you can see how energy stocks performed this month. best performer this is month and some of the energy stocks hitting 52-week highs. also remember that exxon at its best level since november of 2000. also chevron texaco at its best level since june of 2003. in addition, real estate stocks really kind of benefiting from the big rally that we saw in bonds and that is really pushed down the yields. the yields on the 10-year went down to 4.48% from 4.6% just on wednesday. of course, that g.d.p. report had a lot to do with that and that really helped out real estate among the best performers in today’s session. back to you in the studio, matt.
>> deb, thanks very much. well, crude oil in new york rose to a record for the second time this week, concern that supply from the world’s top exporters will be disrupted as fuel consumption surges, helping to keep the price high. for september delivery, crude futures were up over $1, at $43.80, about 2.5% for the week. crude oil about 5%. take a look at the action, we bring you bloomberg reporter mark shank. talk to me about the price of crude. the forecast is no relief in sight.
>> most definitely, according a bloomberg survey conducted today, prices should rise even higher next week.
>> help is not on the way?
>> no. maybe temporary help, but we’ve got ton a rather tough situation this year. on demand has been rising in all the major consuming countries and, at the same time, production capacity has not kept pace.
>> now earlier, i was doing some -- a little bit of work on oil. i put together a chart here. check it out. this is 20 years of crude. lots of arrows and colors and whatnot. the red line is a five-year average, i put that in terms of the price, $28.9 7. you can see we’re well above that and the green year is the 20-year average price, not inflation adjusted.
>> right.
>> he is jumping ahead here. he knows his stuff. but the 20-year average prices is $23.63. 90% above that. why does that matter and give me some idea of this price as to how it really is in terms of inflation and whatnot.
>> well, first of all, since 1990-91, when there was the first persian gulf war, american consumers had gotten used to cheap oil and relatively cheap gasoline and heating oil. so, you know, that has become a relatively minor part of people’s budgets, unlike in the 1970’s. but when adjusted for inflation, this huge rise we’ve seen in prices still hurts. it might be just over $40, but in 1980 dollar, that would be $75 and that’s what we were looking at at that time.
>> is that kind of what opec is saying in terms of―because i hear a lot of them saying our price ban will be moved up and they talk about the weak dollar and, you know, inflation and all these different things. is that part of the reason why this thing―look, the price of oil is just going to go up over time?
>> well, most definitely. they also are quite correct in saying that some of the reasons for the high prices are home made here in the u.s., such as the lack of refining capacity. so, they―they don’t feel that responsible. but, they have not invested in their infrastructure and, you know, there is demand out there.
>> and there’s other suppliers and that’s one of the problems, a lot of times people point to russia, but now we have uncertainty coming out of russia.
>> definitely. most of the opec members nationalize their oil industry. there are very few places where big oil companies can look for oil. russia was, you know, this gold mine, basically, and now it looks very shaky.
>> boy, does it. and the price of yukos is do you know two-thirdses from the very short-term. thank you very much. appreciate it. always good to have you on. mark shenk obviously covers the oil industry and energy markets for bloomberg. another strong sales month for key i can’t motors america. what new models are on tap to keep those cars a-sellin’? we’ll have the answer in our interview with c.e.o. peter butterfield up next.
