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Groovin' Down A Crowded Avenue

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DOW – 24 = 18,432
SPX + 3 = 2173
NAS + 7 = 5162
10 Y – .06 = 1.45%
OIL + .24 = 41.38
GOLD + 15.80 = 1351.40

The S&P 500 index hitting a record intraday high for the seventh time this month as gains in tech heavyweights Alphabet (GOOGL) and Amazon (AMZN) more than made up for losses in energy shares. The S&P 500 index rose as much as 0.3 percent, touching an all-time high of 2,177.09, and completed its fifth straight month of gains. For the week, the Dow fell 0.75 percent, the S&P edged down 0.07 percent and the Nasdaq rose 1.2 percent. In July, the Dow rose 2.8 percent, the S&P climbed 3.6 percent and the Nasdaq gained 6.6 percent.

The U.S. economy grew far less than expected in the second quarter. Gross domestic product increased at a 1.2 percent annual rate after rising by a downwardly revised 0.8 percent pace in the first quarter. The economy was previously reported to have expanded at a 1.1 percent pace in the first quarter. This is the first estimate on second quarter GDP, but economists had forecast growth rising at a 2.6 percent rate.

Inventory investment fell for the first time in nearly five years. Once the impact of a downward inventory adjustment is considered, the underlying pace of growth looks healthier than the headline GDP number. Excluding inventories, the economy grew at a 2.4 percent rate. Consumer spending, which makes up more than two-thirds of U.S. economic activity, increased at a 4.2 percent rate – the fastest since the fourth quarter of 2014. In the second quarter, income at the disposal of households after adjusting for inflation increased to a $13.92 billion rate from a $13.81 billion pace early in the year.

An index that measures what it costs a business to employ a worker— how much Americans earn in wages and benefits — rose 0.6% in the second quarter. The ECI has risen 2.3% in the past 12 months, the fastest pace since early 2015. In the first quarter, wages increased 0.6%. Benefits increased 0.5%.

The Bank of Japan held interest rates steady and offered up only a mild dose of stimulus. The central bank announced it would purchase ¥6 trillion-yen ($57 billion) worth of exchange-traded stock funds annually, an increase from the prior amount ¥3.3 trillion-yen. The size of a key lending program was also doubled to $24 billion. But those moves were far less than expected. And the Bank of Japan left interest rates at 0.1%, which disappointed many investors.

After more than three years of pumping out wave after wave of cheap money that’s failed to secure its inflation target, the Bank of Japan policymakers declared it was time to assess the impact of their policies. Maybe that’s an admission that their policies aren’t working; maybe it is an acknowledgement that they are running out of tools. Or maybe it’s just uncertainty of diving into negative interest rates.

Or maybe this is the setup for an experiment in helicopter money, which is very different from...