Major stock indices ended a volatile week lower with the biggest drop in the Nasdaq 100, now exceeding a 10% decline from recent highs. The data this week showed a slowing economy. Manufacturing PMI’s showed contraction globally, in July and July’s job growth slowed dramatically. The Federal Reserve met and while leaving its benchmark interest rate unchanged, indicated a cut in September is likely noting slowing inflation and a less robust labor market. Some economists criticized the FED as waiting too long to start rate cuts. The Bank of England met and on a 5-4 vote made it’s first cut since 2020 from 5.25% to 5.0%.
Treasury bond yields fell sharply with the 30-year bond yield at 4.162% and the 10-Year note at 3.835%. Freddie Mac reported that the average 30-year mortgage rate fell to 6.73%. Crude oil fell to $73.55 a barrel and natural gas fell to $1.998 per MMBTUs. The U.S. dollar index fell to 103.19 and gold rose to $2514.80 an ounce.
In economic reports this week:
- The S&P CoreLogic Case-Shiller home price index, seasonally adjusted, rose 0.3% in May.
- From the previous May, the index rose 5.9%, down from 6.4% year over year in April.
- S&P Global released its purchasing manager’s indices for July. Keep in mind that anything over 50 represents expansion and anything under 50 represents contraction.
- U.S. manufacturing PMI fell from 51.6 to 49.6.
- Canada manufacturing PMI fell from 49.3 to 47.8.
- Mexico manufacturing PMI fell from 51.1 to 49.6.
- Eurozone manufacturing PMI was unchanged at 45.8.
- China manufacturing PMI fell from 51.8 to 49.8.
- Japan manufacturing PMI fell from 50.0 to 49.1.
- The Commerce Department reported:
- Construction spending fell 0.3% in June after falling a revised 0.4% in May.
- Private construction fell 0.3%.
- Public construction fell 0.4%.
- From a year earlier construction spending is up 6.2%.
- Construction spending fell 0.3% in June after falling a revised 0.4% in May.
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- New orders for manufactured goods fell 3.3% in June following a 0.5% decline in May.
- New orders for manufactured goods fell 3.3% in June following a 0.5% decline in May.
- The Labor department reported:
- Job openings, terminations and quits were little changed in June.
- Employment costs rose 0.9% for the second quarter and were up 4.1% from a year ago.
- Wages rose 4.2%.
- Benefits rose 3.8%.
Source: U.S. Bureau of Labor Statistics
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- Non-farm labor productivity rose 2.3% in the second quarter.
- Output increased 3.3%.
- Hours worked increased 1.0%.
- Unit labor costs increased 0.9%.
- From a year ago, productivity rose 2.7%.
- Non-farm payrolls increased only 114,000 in July, well below economists expectations, and far below the average monthly gain of 215,000 over the past year.
- The unemployment rate rose to 4.3%, up from 4.1% in June.
- Healthcare added 55,000 and construction added 25,000 jobs in June.
- Transit and ground transportation lost 11,000 jobs.
- Average hourly earnings of all workers rose $.08 or 0.2% to $35.07. Over the past 12 months hourly earnings have risen 3.6%.
- Seasonally adjusted first-time claims for unemployment were 249,000, an increase of 14,000 from the previous week’s revised level.
- The 4-week moving average of claims, designed to smooth out volatility, was 238,000, an increase of 2500 from the previous week’s revised level.
- For the full unemployment report go here: https://www.dol.gov/ui/data.pdf .
- Non-farm labor productivity rose 2.3% in the second quarter.
- 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 was unchanged at 13.3MM BPD.
- Natural gas storage rose 18BN cubic feet and is about at the highest level during the past five years at this time of year.
- Baker Hughes reported the number of oil rigs was unchanged at 482 and the number of natural gas rigs fell 3 to 98.
- Earnings Insight reported with 78% of the S&P 500 reporting, the blended earnings increase was 11.5%
Please call us if you have any questions.
Loren Rex – Emeritus
Erik A Smith, AIF® – 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. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).
Sources:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W
https://ir.eia.gov/ngs/ngs.html
https://www.freddiemac.com/pmms
https://www.wsj.com/market-data?mod=nav_top_subsection
https://bakerhughesrigcount.gcs-web.com/na-rig-count
https://www.census.gov/economic-indicators
