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Both stocks and bonds held their ground last week, but the week ahead will set the tone for the near-term direction of markets. The Fed, the economic calendar, and earnings reports will all have an opportunity to have their say.

Corporate earnings for the second quarter continued to be reported last week, and the pace at which they exceeded expectations accelerated. According to Factset, with almost half of all S&P 500 companies now having reported, 76 percent have beaten consensus estimates on earnings, and 67 percent have exceeded on revenues. The pace of aggregate earnings growth for the quarter is now running at 6.7 percent, up from last week’s run rate of 5.5 percent.



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Companies have been keeping a tight grip on their current employees. This indicates that they are seeing an uptick in their business, and are more confident in the economic outlook. This dynamic is likely to coincide with a stronger pace of hiring (which we have already witnessed over the last few months) and suggests another solid month of job growth is likely for July.

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Despite the temporary flight to safety that followed the downing of Malaysian Air flight 17 over Ukraine and the start of the ground war in Gaza, stocks managed to rise for the week. The S&P 500 added 0.5 percent, as a Friday rebound reversed most of Thursday’s drawdown.
 
The week’s economic data was mixed, but the earnings reports were generally better than expected. On the economic front, housing starts and building permits disappointed, although much of the weakness was apparently localized in the South, where poor weather slowed activity.

At the same time, the National Association of Home Builders survey jumped higher after five straight months of weak readings. Industrial production was softer than anticipated, but regional manufacturing surveys from New York and Philadelphia easily exceeded expectations.
 



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June retail sales came in weaker than expected this morning but the shortfall was largely covered by upward adjustments to prior months’ data (again). Generally we see the outlook for consumer spending as quite positive, particularly considering the recent acceleration in monthly employment gains.
 
Overall, we see this morning’s retail sales report as being better than the headline number would indicate. Total sales were a modest 0.2 percent higher, but this should be considered against the upward revisions to results for May and April.  In fact, this was the fourth straight retail sales report that contained material upward revisions to prior month data – a trend we believe could very well continue in July.



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While Portugal’s Banco Espírito Santo scare may have provided a convenient scapegoat for the market’s temporary wobble last week, the reality is that it likely had little to do with U.S. stocks shedding 0.9 percent, their worst performance since early April.

More likely, last week’s selloff had more to do with investors returning from the long holiday weekend and taking another look at the strength of the June jobs report and reassessing its impact on the pace of future Fed policy. There were also likely some jitters ahead of the start of second quarter earnings season. With valuations and sentiment elevated, the role of earnings becomes even more important in supporting equity prices.
 



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A blowout employment report for June kicked off the July 4 holiday with a bang. The Bureau of Labor Statistics reported that the U.S. economy generated 288,000 new non-farm jobs, well in excess of the 215,000 that had been expected. In addition, the prior two month total was revised higher by 29,000 jobs, leaving a second quarter monthly average of 272,000 new jobs created.

In contrast, the first quarter monthly average was 190,000 new jobs, some 30 percent lower. The rate of unemployment fell to 6.1 in June, the lowest since September, 2008. Investors certainly welcomed the report, driving stock prices to new highs and pushing bond yields modestly higher.
 



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Despite failing to establish another new record weekly close, stocks managed to hold onto most of the gains from the previous week’s record. A range of economic reports contained mostly good news last week, with the notable exception of the pace of personal consumption in May, which raised some concern over the state of the consumer sector. Otherwise, the data was mostly encouraging, and reinforced the idea that second quarter activity may have rebounded to a 3.0-3.5 percent annualized pace. The flip side of the consumer spending report showed a rise in disposable personal income, which pushed the national savings rate to 4.8 percent, its highest since last September.

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MINNEAPOLIS – June 24,  2014 – Ameriprise Financial, Inc. (NYSE: AMP) plans to announce its second quarter 2014 financial results on Tuesday, July 29, 2014 after the close of the New York Stock Exchange. The company will host a conference call to discuss the results on Wednesday, July 30, 2014 at approximately 9:00 a.m. (ET).
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MINNEAPOLISJUNE 24, 2014 – Ameriprise Financial (NYSE: AMP) today announced grants of more than $1.6 million to nonprofits that improve the lives and well-being of people nationwide. In the first of two grant cycles for 2014, the company awarded funding to economic, social and cultural enrichment programs benefitting thousands of individuals. A $500,000 grant will go to Feeding America®, the nation’s leading hunger-relief organization, as part of the company’s ongoing commitment to help solve hunger in America.
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MINNEAPOLIS – (June 17, 2014) – Women are feeling confident and many are taking the lead in making financial decisions, according to a new study by Ameriprise Financial (NYSE: AMP). The new Women and Financial PowerSM study, which surveyed women ages 25-70 with at least $25,000 in investable assets, found that 41 percent of women surveyed are making financial decisions alone. While a majority of these women are either unmarried or divorced (63%), the rest (37%) are in long-term relationships and making financial decisions for the household. View More