RECAP: for the Week ending July 1, 2016

July 4, 2016

After a decline on Monday, U.S. stocks began a rally on Tuesday. The gains brought the large-cap Standard & Poor’s 500 Index nearly back to its level before Britain’s surprising vote to leave the European Union was revealed on the previous Thursday. The S&P 500 and most of the other major benchmarks now sit with gains for the month of June except for the technology-heavy Nasdaq Composite. Some positive U.S. economic news also helped boost sentiment later in the week: The first-quarter economic growth estimate was revised upward due to better readings on net exports and business investment.
Municipal bonds were positive for the week and President Obama signed legislation on Thursday that will set up an oversight board to help Puerto Rico restructure its debt. The U.S. commonwealth has about $70 billion in overall debt and has been a significant issuer in the municipal bond market because of its ability to issue bonds that are tax-free in all 50 states. Puerto Rico has defaulted on several debt obligations over the past year, including $2 billion that was due July.
UK and European stock markets gained ground late in the week after Bank of England Governor Mark Carney  suggested there would likely be further monetary policy easing.. His comments added to pressure on the British pound, which fell to a three-decade low following their vote to leave the European Union. Carney warned that UK economy would soon feel the strain of the drop in the pound and that the bank would “take whatever action is needed to support growth.” Both the FTSE 100 and the pan-European Stoxx Europe 600 ended the week higher. Standard & Poor’s Global Ratings downgraded the UK’s AAA credit rating on Monday after warning that a vote to exit the EU threatens the country’s constitutional and economic integrity. Fitch Ratings followed, cutting UK ratings one notch to AA. S&P also lowered the EU’s long-term credit rating to AA from AA+, noting that the UK’s departure will require complicated budget negotiations, which would create significant uncertainty.

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