Investors are bracing for the week ahead more cautiously after the S&P 500 dropped 2.7 percent last week, marking its largest weekly loss in 2 years over concerns that the U.S. Federal Reserve will raise short-term interest rates sooner than expected in 2015, combined with wider global concerns such as default issues in Argentina, banking problems in Portugal, violence in eastern Ukraine, and sanctions being imposed on Russia.
The U.S. Commerce Department reported last Wednesday that the economy grew at an annual rate of 4 percent in the second quarter of 2014, surpassing estimates after a first quarter contraction of -2.1 percent that was mostly blamed by economists on the cold winter weather slowing business activity.
Although the employment report on Friday from the Department of Labor showed 209,000 jobs added to the economy in July, it was lower than consensus forecasts and the unemployment level actually ticked higher to 6.2 percent from 6.1 percent in June.
Still the U.S. economy has been adding over 200,000 jobs for 6 consecutive months and is showing stability at a time when inflation is picking up and moving closer to the Federal Reserve’s 2 percent inflation target.
On Friday the Institute for Supply Management released a July manufacturing report that showed its fastest expansion in over three years.
The rising tide of strong U.S. economic data has given the more hawkish members of the Federal Reserve plenty of reasons for arguing in favor of raising short term interest rates sooner than the dovish members of the Federal Reserve would prefer in 2015.
Congress began their 5 week recess on Friday after the House passed a scaled down $694 million dollar immigration bill that was in conformity with what conservatives in the Republican party had requested ahead of the mid-term elections in November.
On Friday President Obama held a press conference and promised to veto the House bill once it comes to his desk.
In July Obama asked Congress for $3.7 billion in emergency funds to assist unaccompanied children at the border and improve border security.
The Senate failed to approve an earlier proposal of a $2.7 billion immigration bill.
The week ahead will see much less economic data compared to last week.
Tuesday: Factory Orders and ISM Services (10:00 am EST)
Wednesday: Trade Balance
Thursday: Consumer Credit, Jobless Claims
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