Weekly Market Commentary

The Dow Jones Industrial Average dropped 316 points for the week, down -1.8% to 17,373. The S&P 500 Index was down 26 points, a loss of -1.3%, to finish at 2,078.  

The Nasdaq Composite fell -1.7% to close at 5,044. The S&P MidCap 400 Index closed the week at 1,488, down -1.0%. The Russell 2000 declined by -2.6% to end the week at 1,207.  

The MSCI ETF "EFA", the proxy for developed international equity markets, was down slightly at -0.3% for the week. Emerging markets, as represented by the MSCI ETF "EEM", were down -2.2%.  

Domestic High Yield corporate bonds were off -0.8% for the week, as measured by the Bank of America Merrill Lynch US High Yield Master II Index.  

US stocks slid while European stocks rose this week, and Asian shares were mixed. Global data were mildly disappointing overall, though a solid US monthly employment report was seen as increasing the likelihood that the US Federal Reserve will raise interest rates in September.  The yield on the 10-year US Treasury note rose to 2.22%, while the yield on Germany's 10-year bund closed at 0.66% on Friday.  The euro stood near $1.09.  Oil prices extended a sharp six-week slide, with US West Texas Intermediate and international Brent crude oil falling to around $44 and $49 per barrel, respectively. High-yield bond funds reported net weekly outflows of $1.201 billion for the week ended August 5th. High-yield bond issuers grew cautious in the week ended July 31st, issuing just $2.48 billion in new debt across 4 transactions.      

In US economic news, the US economy added 215,000 jobs in July, and the May and June tallies were revised up by 14,000 for an average of 235,000 per month, up from the first quarter's average of 195,000.  The unemployment rate remained at 5.3% and labor force participation at 62.6%, a 38-year low.  Full-time jobs rose to 81.7% of total employment, the highest share since November 2008.           

Hourly pay rose 0.2% over the month and 2.1% from a year earlier, while the average work week increased 6 minutes to 34.6 hours.  Initial jobless claims edged up 3,000 to 270,000 for the week ended August 1st, marking the 22nd consecutive week of initial claims below 300,000.  The four-week moving average fell 6,500 to 268,250.  Continuing claims declined 14,000 to 2.26 million for the week ended July 25th.  The US trade deficit widened 7.1% to $43.8 billion in June.  Exports were flat, while imports rose 1.2%, with the strong US dollar and weak overseas demand hurting exports and boosting imports.  This has weighed on US manufacturers and created an obstacle to faster US growth.  

In international economic news, Greece's manufacturing PMI plunged to an all-time low of 30.2 in July, but the overall Eurozone PMI rose to 52.4.  While activity slowed somewhat in Germany, Spain, and the Netherlands; Italy's PMI rose to a four-year high.  German factory orders rose 2% from May to June and 7.2% year over year, according to the country's Federal Statistical Office.  Strengthening demand from neighboring Eurozone countries more than offset the slight contraction in domestic orders.  By contrast, in a separate report released Friday, German industrial production contracted -1.4% month over month.  The Caixin China manufacturing PMI dropped from 49.4 in June to 47.8 in July, held back by slumping foreign and domestic demand and possibly impaired by China's sharp stock market slide in late June and July.