Blog Post

Stocks End the Week Lower As Fitch Downgrades U.S. Government Debt

The stock markets were rattled and bond yields soared on Wednesday following Fitch’s downgrade of U.S. debt from AAA to AA+.

Saudi Arabia extended its voluntary 1MM barrel per day production cut through September.  That and a drop in global and U.S. inventories of oil caused crude prices to rise.

While the labor market remains strong, hiring has slowed, and an increase in 2nd quarter productivity reduces the impact of wage increases on inflation.  On Friday, Atlanta FED President Raphel Bostick noted the slower employment gains and said he believes there is no need to hike rates further to ease inflation.

Treasury bond yields rose with the 30-year bond yield at 4.201% and the 10-Year note at 4.048%.  Freddie Mac reported that the average 30-year mortgage rate rose to 6.90%.  Crude oil rose to $82.62 a barrel and natural gas fell to $2.583 per MMBTUs.  The U.S. dollar index rose to 102.20 and gold rose to $1977.20 an ounce.

  • S&P Global released its purchasing manager’s indices for July.  Keep in mind that anything over 50 represents expansion, while anything under 50 represents contraction.
    • U.S. manufacturing PMI rose from 46.3 to 49.0.
    • U.S. services PMI fell from 54.4 to 52.3.
    • Mexico manufacturing PMI rose from 50.9 to 53.2.
    • Canada manufacturing PMI rose from 48.8 to 49.6.
    • Eurozone manufacturing PMI fell from 43.4 to 42.7.
    • Eurozone composite PMI fell from 49.9 to 48.6.
    • Japan manufacturing PMI fell from 49.8 to 49.6.
    • Japan services PMI fell from 54.0 to 53.8.
    • China manufacturing PMI fell from 50.5 to 49.2.
    • China services PMI rose from 53.9 to 54.1.
  • The Commerce Department reported
    • Construction spending rose 0.5% in June and a revised 1.1% in May.
    • Manufactured goods orders rose 2.3% in June up from a 0.3% increase in May.
  • The Labor Department reported:
    • Job openings in June were little changed at 9.6MM.
    • Job quits fell 295,000 to 3.8MM.
    • Productivity grew 3.7% in the second quarter, the biggest increase since 2020.
      • Output increased 2.4 percent and hours worked decreased 1.3 percent.
      • Unit labor costs grew 1.6%.
    • The U.S. added 187,000 non-farm jobs in July and the unemployment rate fell to 3.5%.
    • Average hourly earnings rose 0.4% in July and has risen 4.4% from a year ago.
    • Seasonally adjusted first-time claims for unemployment were 227,000, an increase of 6,000 from the previous week’s level.
      • The 4-week moving average of claims, designed to smooth out volatility, were 228,250 a decrease of 5,500 from the previous week’s level. 
  • The EIA weekly oil report is here: .  Also, the EIA reported in the prior week:
    • Field production of crude oil was unchanged at 12.2MM BPD.
    • Natural gas storage rose 14BN cubic feet and is above the 5-year average at this time of year.
  • Baker Hughes reported the number of active oil rigs fell 4 to 525.  The number of active natural gas was unchanged at 128.
  • Factset reported with 84% of S&P 500 companies reporting 2nd quarter earnings, the blended earnings decline was 5.2% year over year.

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

Founder / Emeritus                                                                            President & C.E.O.                                  

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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