Major stock indices ended the week with modest gains.  Friday saw stocks vacillate between gains and losses as the U.S. posted robust hiring in July.  While hiring is good for growth it may cause the FED to hike rates faster to combat inflation.  The U.S. has finally reached employment levels previously reached just prior to the pandemic.  Hiring still remains strong despite two quarters of economic contraction.

Wheat prices declined this week as the first ship of Ukrainian wheat exports left the region.  This follows an agreement between Ukraine and Russia with the help of Turkey.

OPEC+ met and agreed to increase output in September by only 100,000 barrels per day.  This was much smaller than the 648,000 barrels per day target increases in production targets for July and August and comes despite President Biden’s meeting with Saudi Arabia.  However, many OPEC+ countries have struggled to keep up with the pace of production target increases.  The U.S. is still releasing 2MM barrels per day from the Strategic Petroleum Reserve and oil and gas inventories have improved.  The average retail gasoline price has fallen each of the past 50 days.  Natural gas remains a separate issue with heatwaves driving increased demand in the U.S.  U.S. exports of liquified natural gas have been hampered by the explosion at one export facility which should be back on line near year end.

The Bank of England met and raised short term interest rates by 0.5% to 1.75%, the largest increase since 1995.

Treasury yields rose with the 30-year bond yield at 3.070% and the 10-Year note at 2.842%.  Mortgage ended unchanged at 5.43%.  U.S. crude oil fell to $88.35 a barrel and natural gas fell to $7.99 per MMBTUs.  The U.S. dollar index rose to 106.58.  Gold rose to $1790.10 an ounce.

In the economic numbers:

• S&P Global (formerly IHS Markit) reported purchasing manager indices for July.  Keep in mind that anything over 50 represents contraction and under 50 represents contraction.
  • U.S. manufacturing PMI fell from 52.7 to 52.2, the lowest since June of 2020.
  • U.S. services PMI fell from 52.7 to 47.3.
  • Eurozone manufacturing PMI fell from 52.1 to 49.8.
  • Eurozone services PMI fell from 53.0 to 51.2.
  • China manufacturing PMI fell from 51.7 to 50.4.
  • China services PMI rose from 54.5 to 55.5.
  • Japan manufacturing PMI fell from 52.7 to 52.1.
  • Japan services PMI fell from 54.0 to 50.3.
  • Mexico manufacturing PMI fell from 52.2 to 48.5.
• The Federal Reserve reported that consumer borrowing surged $40BN in June, the second highest ever.
  • Credit card balances, auto and school loans balances all rose. 
• The Commerce Department reported:
  • Construction spending fell 1.1% in June.  May construction spending was revised from -0.1 to + 0.1%.  From a year ago construction spending in June was up 8.3%.
  • The U.S. trade deficit fell 6.2% in June.
    • Exports rose due to increased energy and food exports.
    • Imports fell on reduced imports of automobiles and food.

• The Labor Department reported:
  • The U.S. added a robust 528,000 jobs in July and unemployment fell to 3.5%, now reaching pre-pandemic levels of employment.

• • The number of job openings in June was 10.7MM down from 11.3MM in May, the lowest level since September.
    • Job quits dropped from 4.3MM to 4.2MM.
    • Job openings are still well above the number of unemployed, but still seeking work, at 5.9MM.
  • Seasonally adjusted first time claims for unemployment fell to 260,000, down from a revised 254,000 in the prior week. 
    • The 4-week moving average of claims, designed to smooth out volatility, rose to 254,750 from a revised 248,750.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil was unchanged at 12.1MM BPD.
  • Natural gas storage rose 41BN cubic feet and is below the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs fell 7 to 598.  The number of active natural gas rigs rose 4 to 161.
• Factset reported that with 87% of S&P 500 companies reporting 2^nd quarter earnings, the blended earnings increase is 6.7%.

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

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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.