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August 10, 2015 - Stocks Fall on Oil Woes

| August 10, 2015
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Stocks gave in to gloom about low global oil prices and fell again last week, erasing the previous week's gains. For the week, the S&P 500 lost 1.25%, the Dow fell 1.79%, and the NASDAQ dropped 1.65%.[1]

Domestically, the data looks more positive. Friday's July jobs report might have given the Federal Reserve the ammunition it needs to raise interest rates in September. The latest data shows that the economy added 215,000 new jobs last month, bringing the total for 2015 to 1.48 million so far.[2] Unemployment held steady at 5.3% (very close to the Fed's long-term average of 5.1%) and wages edged up 0.2%.[3] Combined with growth in the total number of hours worked, workers' total cash earnings are up 4.8% from a year ago, giving American workers more money to spend.[4]

Last month was also the 65th month in a row with growth in private (non-government) payrolls, marking the longest jobs-growth streak since the 1930s.[5] All told, the labor market continues to improve. While we're not in the boom times of the 80s or 90s, our "Plow Horse economy" is moving ahead moderately, which may set the stage for a rate increase later this year.[6]

In not-so-great news, Puerto Rico missed a municipal bond payment, marking a major setback for the U.S. territory, which has suffered from years of stagnant growth and rampant unemployment. Technically, Puerto Rico's Finance Corporation, (PFC) has until this Tuesday to make its debt payment, but it's not likely to make the deadline. Puerto Rico owes $73 billion in debt, much of it to investors in its municipal bonds.[7]

While the default may spell financial disaster for the territory, long-term investors are unlikely to be affected. The default has been widely expected, and ratings agencies downgraded Puerto Rico's debt into junk territory earlier this year.[8] The default is also unlikely to affect the broader muni bond market since the situation in Puerto Rico is not representative of most municipal bond issuers. Improving credit conditions and broad economic growth across the country mean that investment-grade muni bonds may be an option for some investors as part of a well-diversified portfolio strategy.

Looking ahead, the week is light on economic data, though analysts will be looking for consumer sentiment and retail sales data for clues about the back-to-school shopping season. Back-to-school shopping is the second largest retail shopping event after the winter holidays and is an important barometer of overall consumer spending.[9]

ECONOMIC CALENDAR:

Tuesday: Productivity and Costs
Wednesday: JOLTS, EIA Petroleum Status Report, Treasury Budget
Thursday: Jobless Claims, Retail Sales, Import and Export Prices, Business Inventories
Friday: PPI-FD, Industrial Production, Consumer Sentiment

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

HEADLINES:

Low pump prices fuel vehicle sales. The July motor vehicle sales report shows that U.S. car manufacturers are reaping the benefits of low gas prices as consumers rush to buy SUVs and bigger vehicles. The industry is close to pre-recession sales numbers.[10]

Oil prices reach multi-month lows. Though crude oil supplies fell, a jump in U.S. gasoline inventories sent global oil prices low again. If refineries continue to produce at capacity, gasoline stocks will remain high even after the peak driving season.[11]

Factory orders rebound in June. Orders for manufactured goods jumped in June in a positive sign for the struggling sector. A strong dollar and weak energy prices had stalled manufacturing activity in May.[12]

Consumer debt rises in June. Americans took on debt faster in June, suggesting that an improving labor market may be making them comfortable enough to open their wallets.[13]




These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

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  1. https://finance.yahoo.com
    https://finance.yahoo.com
    https://finance.yahoo.com
  2. https://research.stlouisfed.org
  3. http://www.cnbc.com/2015/08/07
  4. http://www.ftportfolios.com/Commentary
  5. http://www.ftportfolios.com/Commentary
  6. http://www.ftportfolios.com/Commentary
  7. http://www.ibtimes.com
  8. http://www.cnbc.com/2015/04/27
  9. http://www.forbes.com/sites/
  10. http://www.usatoday.com/story
  11. http://www.foxbusiness.com/markets/
  12. http://www.foxbusiness.com/economy-policy
  13. http://www.foxbusiness.com/economy-policy
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