In the first part of the week stocks fell mainly on geopolitical concerns and rallied at the end of the week on a reduction of these concerns.  I believe this enthusiasm is premature.  Yes, a senior Russian official said that Russia wanted to de-escalate the situation in Ukraine but Russia’s actions continue to do the opposite.  Yes, President Obama’s decision to launch airstrikes on the Islamic State militants was a positive but Iraq has become a mess and we are a long way from seeing this resolved.  Yes, Israel and Hamas had a cease fire that held for a little while but it broke down.  So, I don’t see much improvement in the geopolitical situation.  However, none of these things will have a major impact on the US economy.  Russia did retaliate with sanctions of their own and this may affect food exports to Russia but this will have little effect on the overall US economy.  Western Europe will be more affected.

US stocks rose modestly this week.  International stocks were weaker.  Treasury bonds also rose as yields fell.  Economic data this week was positive and included:

The Commerce Department reported that US Factory Order rose 1.1% in June beating forecasts of a 0.5% increase.

• The Institute for Supply Management’s non-manufacturing purchasing managers index rose to 58.7 in July from 56.0 in June better than the 56.5 forecast.
• The Commerce Department reported that the trade deficit fell 7.0% in June, more than forecast as imports fell and exports rose.
• The Labor Department reported that first time claims for employment in the prior week fell to 289,000 less than the 300,000 forecast.  The four week moving average of claims also fell to 293,500.
• The Labor Department reported that US non-farm productivity in the 2^nd quarter grew at a 2.5% annual pace after falling 4.5% in the first quarter.  Unit labor costs rose at a 0.6% rate during the quarter. From the previous year productivity rose 1.6%.