Blog Post

Stocks End Busy Week of Data Lower

Stock indices ended the busy economic news week with modest declines.

FED chair Powell delivered the semi-annual report to Congress on Wednesday.  The report forecasts that inflation will moderate but will likely remain elevated this year.  He also said the FED is “a ways off” from reducing its bond purchases of $120BN per month.

OPEC+ reached a compromise agreement to increase oil production.  They cut production 9.7MM barrels per day, roughly 10%, in the beginning of the pandemic.  Previously they added back 4MM barrels per day.  They had nearly approved a plan to increase production by 400,000 barrels per day each month going forward but struggled to get approval from member UAE who wanted a bigger portion of the production.  The compromise agreement grants that the UAE baseline has increased but less than the U.A.E. requested and the 400,000 barrel per day each month increase remains intact.    Prior to the pandemic, the world was still facing a glut of oil inventories but with the reopening of the global economies, inventories have fallen and prices have risen.  OPEC+ is still cautious not to create another inventory glut of crude oil and is concerned if new variants of the virus could dampen demand going forward.  Therefore, they have chosen the plan to increase production gradually each month.

Both the EU and China independently announced ambitious plants to cut greenhouse gas emissions.  The measures were criticized by industries that will be affected by increasing costs and by environmentalists as not ambitious enough. Japan’s central bank announced a plan to fund renewable energy investments by offering zero interest loans through 2030.

Treasury yields fell with the 30-year bond yield closing at 1.922% and the 10-Year note closing at 1.294%.  Crude oil fell to $71.45 a barrel and natural gas rose to $3.68 per MMBTUs.  The U.S. dollar index rose to 92.17 and gold rose to $1812.50 an ounce.

In the economic numbers this week:

  • China reported
    • Gross domestic product rose 7.9% in the second quarter from a year earlier down from 18.3% year over year in the first quarter.
    • Fixed asset investment rose 12.6% in the first half of the year.
    • Retail sales rose 13.9% for the second quarter.
    • Exports increased 32.2% in June from a year earlier, up from 27.9% year of year gain in June.  The increase occurred despite a new virus lockdown in the Guangdong province.
    • Growth was 7.9% in the second quarter from a year earlier, down from 18.3% year over year in March.  For the first half of the year growth was 12.7% from a year earlier.
    • Retail sales grew 12.6% in the first half of the year.
    • The unemployment rate was unchanged at 5.0% in June.
  • The Federal Reserve reported that industrial production rose 0.4% in June following a revised 0.7% gain in May.  Industrial production includes:
    • Factory production which fell 0.1% in June following a revised 0.9% gain in May.  The slight decrease was due to a 6.6% decrease in auto production. 
    • Utility output which rose 2.7% due to greater air conditioning demand.
    • Oil and gas drilling rose 1.9% in June following a 4.3% gain in May.
  • The Commerce Department reported that retail sales rose 0.6% in the month of June.  Excluding autos, which are in short supply, retail sales rose 1.3%.  Auto sales fell 2%.
  • The Labor Department reported: 
    • The consumer-price index rose 0.9% in June from May and 5.4% from a year earlier.  This was the largest one month increase in 13 years.  
      • The core index, excluding volatile food and energy rose 4.5%.
      • Used car prices rose 10.5% accounting for 1/3 of the increase, as chip shortages continue to affect availability of cars.
      • Price recovery in air travel, hotels, rental cars, entertainment and recreation also rose sharply after being hit hard by the pandemic.
    • A seasonally adjusted 360,000 workers filed initial claims for unemployment in the week ending July 10th, down 26,000 from a revised 386,000 the week before and a new post pandemic low.  
    • The 4-week moving average of claims, designed to smooth out volatility, fell 14,500 to 382,500.
    • Continuing claims fell from 3.3MM to 3.2MM in the week ending July 3rd.
    • A broader measure of claims including extended benefits, pandemic assistance and other programs fell from 14.2MM to 13.8MM in the week ending June 26th.
    • For the full unemployment report go here: .
  • The EIA weekly oil report is here: .  Also, the EIA reported in the prior week:
    • Field production of crude rose from 11.3MM BPD to 11.4MMBPD.
    • Natural gas storage rose 16BN cubic feet and is below the 5 year average at this time of year.
  • Baker Hughes reported the number of active oil rigs rose 2 to 380.  The number of active natural gas rigs increased 3 to 104.
  • Factset reported with 8% of companies reporting 2nd quarter earnings, the blended earnings growth rate is 69.3% from the second quarter last year.

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Best Regards,

Loren C. Rex, CFP®, MA                                                            Erik A Smith AIF®

President                                                                                  Managing Partner

Generations Financial Planning & Wealth Management        269-441-4143

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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.


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