Stocks ended the week higher with the small company Russell 2000 index posting the biggest gains. The July jobs number came in better than expected. As of weeks end, congressional negotiators failed to reach a deal for the next stimulus bill and President Trump promised executive action to continue enhanced unemployment, eliminate payroll taxes and extend the foreclosure moratorium until year’s end. However, it remains to be seen if all of the promised actions can be done through executive orders or if Congress will act before they are executed.
More and more, this seems to be a bifurcated economy. Some sectors such as online shopping, housing and technology are producing earnings that, in many cases, are higher than the same period a year ago. Many companies continue with losses or severely reduced earnings, such as energy, restaurants, aircraft and travel. RV sales are the exception to travel as Americans see them as a safer way to travel. Healthcare stocks have benefited from an increased focus on Covid treatments. However, in the case of large pharmaceutical companies, it is not known what the bottom line results will be for vaccines or antivirals as some of them have pledged to provide treatments “at cost.” Ultra-low interest rates, unlimited Fed support and fiscal relief spending have and likely will continue to support the economy for the time being.
Treasury yields rose slightly with the 30-year bond yield at 1.236% and the 10-Year note at 0.568%. Crude oil rose to $41.60 a barrel and natural gas rose to $2.255 per MMBTUs. The U.S. dollar index ended the week lower at 93.39 and gold prices rose to $2046.10 an ounce.
In the economic numbers this week:
- IHS Markit reported its purchasing managers indices for July:
- U.S. Manufacturing PMI increased from 49.8 in June to 50.9. Being over 50, this shows an increase in manufacturing over the previous month for the first time since February.
- U.S. Services PMI rose from 47.9 to 50.0.
- China manufacturing PMI increased from 51.2 in June to 52.8.
- China services PMI fell from 58.4 to 54.1.
- Eurozone manufacturing PMI increased from 47.4 in June to 51.8
- Eurozone composite PMI increased from 48.5 to 54.9.
- Japan manufacturing PMI increased from 32.3 in June to 41.2, still in contraction.
- Japan services PMI rose from 45.0 to 45.4.
- The Commerce Department reported the U.S. trade deficit fell 7.5% in June as exports rose more than imports with a strengthening global economy. Still trade levels are far below February levels.
- The Labor Department reported:
- 1.186MM workers filed initial unemployment claims last week, down from the previous week.
- Continuing unemployment claims fell from a revised 16.951MM to 16.628MM.
- The U.S. netted a gain of 1.8MM jobs in July and the unemployment rate fell to 10.2%.
- Factset reported with 89% of the S&P500 companies reporting 2nd quarter earnings, the blended earnings decline is 33.8%.
- The EIA weekly oil report is here wpsrsummary. Also, the EIA reported in the past week:
- Field production of crude oil was unchanged at 11.0MM barrels per day. The peak production at the end of February was 13.1MM barrels per day.
- Natural gas storage rose by 33BN cubic feet and is above the five year average at this time of year.
- Baker Hughes reported the number of active oil rigs fell 4 to 176, a 15 year low. The number of active natural gas rigs was unchanged at 69.
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Loren C. Rex, CFP®, AIF®, MA Erik A Smith AIF®
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
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These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.