Stocks ended the volatile week mixed with only the small cap Russell 2000 index ending with a slight gain.
European Union leaders agreed to a framework to wean off it’s use of Russian oil which would ban Russian oil by ship and only allow one pipeline to supply oil until a technical solution is found to supply landlocked Hungary. The plan, part of a sixth package of sanctions, when enacted, would take effect in six months for crude via ship and eight months for refined products. So far, Western sanctions have forced Russia to reduce production by 700,000 barrels per day.
OPEC+ met and agreed to increase production faster to alleviate the world oil shortage. Instead of a 400,000 barrel per day increase, in July and August the production increase will be 648,000 barrels per day each month. Most of the additional production will come from Saudi Arabia. Relations between Saudi Arabia and the U.S. have been strained but may have been boosted by senior U.S. diplomatic visits. Saudi Arabia also announced it was extending its truce with the Houthi rebels in Yemen and President Biden is expected to visit later this month. While the increase in production should help to slow increases in petroleum and gas prices, it likely is not enough to lower them at this time.
Social Security released it’s annual report on the state of Social Security Funding and announced that the trust fund is now expected to last a year longer, until 2034 based on the strong economic recovery coming out of the pandemic. Based on the latest projection, if no action is taken by Congress to shore up Social Security, beginning in 2034, it could only pay out up to the revenue coming in, which is approximately 70% of promised benefits. Each year Social Security provides this report to Congress and each year, no action has been taken. The Social Security disability fund was reported to be solvent for the next 75 years, for the first time since the 1983 report.
Treasury yields rose with the 30-year bond yield at 3.096% and the 10-Year note at 2.942%. Mortgage rates rose with the 30-year mortgage rate ending at 5.43%. U.S. crude oil rose to $120.30 a barrel and natural gas fell to $8.535 per MMBTUs. The U.S. dollar index rose to 102.14. Gold rose to $1853.50 an ounce.
In the economic numbers:
- The Eurozone reported that inflation hit 8.1% year over year in May, up from 7.4% in April.
- The S&P CoreLogic Case-Shiller National Home Price Index was up 20.6% in March from a year earlier up from 20.0% in February. This was the highest home price growth since the index began in 1987.
- The Bank of Canada raised short term interest rates 0.5% to 1.5%.
- IHS Markit released it’s monthly purchasing managers indices for May. Keep in mind that anything over 50 represents expansion and under 50 represents contraction:
- U.S. manufacturing PMI fell from 59.2 to 57.0.
- U.S. services PMI fell from 55.6 to 53.4.
- Canada manufacturing PMI rose from 56.2 to 56.8.
- Japan manufacturing PMI fell from 53.5 to 53.3.
- Japan services PMI rose from 50.7 to 52.6.
- Eurozone manufacturing PMI fell from 55.5 to 54.6.
- Eurozone composite PMI fell from 55.8 to 54.8.
- China manufacturing PMI rose from 46.0 to 48.1.
- The Labor Department reported:
- The U.S. added a net of 390,000 jobs in May, the slowest since April 2021.
- Seasonally adjusted first time claims for unemployment fell to 200,000, down from 211,000 in the prior week.
- The 4-week moving average of claims, designed to smooth out volatility, fell to 206,500.
- 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 11.9MM BPD.
- Natural gas storage rose 90BN cubic feet and is below the 5-year average at this time of year.
- Baker Hughes reported the number of active oil rigs was unchanged at 574. The number of active natural gas rigs was unchanged at 151.
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Loren C. Rex, CFP®, MA Erik A Smith, AIF®
Founder / Emeritus President & C.E.O.
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
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.