U.S. and World News
- Japanese Prime Minister Shinzo Abe announced that he intends to introduce corporate tax cuts for capital expenditures as part of the government’s sweeping plan to pull the economy out of deflation. Abe originally disappointed markets last week when these provisions were not included when he unveiled the plan. Despite the announcement, extreme volatility continued in the Japanese markets this week as the Nikkei officially entered bear market territory with the index more than 20% off of its highs.
- The Senate passed a $955 billion agriculture bill that would reduce farm spending by $18 billion over the next decade, partly by ending the practice of making direct payments to farmers irrespective of crop yields, market prices and the economy. The bill would also slash spending on food stamps by $4 billion. The House is expected to take up its version of the legislation next week, which includes cutting food stamp by $20 billion.
- The Wall Street Journal’s Jon Hilsenrath, who seems to have the inside track on the inner workings of the Federal Reserve, quoted officials as saying that a tapering of asset purchases doesn’t mean an end to those purchases. Officials also said that a hike in short-term interest rates isn’t anywhere close to being on the radar at this point.
- Stock markets ended the week down as the S&P 500 Index fell 1.0%, closing at 1,627. The Dow Jones Industrial Average was down 1.2% to close at 15,070. After this week’s decrease, the S&P and the Dow are respectively up 15.0% and 14.1% year to date.
- Treasury yields came back down this week as discussion as to when the Federal Reserve will begin to taper their asset purchases continues. The 5 year and 10 year treasury finished the week at 1.03% and 2.13% respectively.
- The spot price of WTI Crude Oil rose again this week, increasing by 1.9%, closing at $97.86 per barrel. On the year, oil prices are up 4.4%.
- The spot price of Gold was slightly up this week, rising by 0.5% and closing at $1390.36/ounce. Gold is down 17.0% for the year.
- Weekly Initial Jobless Claims fell this week as claims decreased by 12,000 and came in lower than expected at 334,000 vs. consensus expectations of 346,000. The 4-week moving average of jobless claims moved down to 345,000. After recent volatility, jobless claims appear to be continuing their downward trend.
- University of Michigan consumer sentiment fell to a reading of 82.7 vs. consensus expectations of 84.5. The drop was driven by consumers’ assessments of current conditions.
- U.S. states are expected to end their fiscal year on June 30th with a combined surplus of $23.7 billion after taking in stronger than expected revenues. However, the future is more uncertain, as revenues this year may have been boosted by citizens selling assets ahead of a capital gains tax hike. Going forward, states will also have to cope with federal spending cuts, an expansion of Medicaid and increasing pension obligations.
Fact of the Week
- Health care costs in America are equal to 17.6% of the US economy, a larger percentage than any other country in the world. The proportion of our economy that goes to health care is 47% greater than the country in second place in this ranking, with the Netherlands spending 12.0% of its economy on health care.
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