U.S. and foreign stocks had substantial gains this week with U.S. small company stocks having the largest gains. Stocks rallied sharply on Friday after the stellar jobs report and despite fears of the trade war between the U.S. and China. Not only did we see a good gain in jobs creation we saw a large number of people re-entering the workforce causing the unemployment rate to rise from 3.8 to 4.0%. This coupled with a healthy but not excessive year over year wage increase of 2.7% raised anticipation of continued strong U.S. growth and a FED patient with the rate of interest rate increases. Both the U.S and China levied tariffs of 25% on $34BN worth of goods on Friday but Trump has threatened increased tariffs on as much as $450BN in additional Chinese goods. If the trade war escalates to this level and lasts for months it will decrease U.S. and global growth.
For the week, the 10-year Treasury yield fell on trade fears as did the dollar. Commodities, including oil were down slightly with the exception of gold.
In the numbers this week:
- The Institute for Supply Management reported
- Its manufacturing index rose from 58.7 in May to 60.8 in June representing acceleration in the growth of the manufacturing sector. Positioning ahead of tariffs was attributed as a factor and we may see this trend reverse in coming months.
- Its non-manufacturing index rose from 58.6 in May to 59.1 in June.
- The Commerce Department reported the U.S. trade gap fell by 6.6% as exports rose more than imports. Almost half the export increase was due to a huge jump in soybean exports in anticipation of tariff increases.
- The Labor department reported
- First time claims for unemployment rose 3,000 to a seasonally adjusted 231,000 in the prior week. The four week moving average of claims rose 2250 to a seasonally adjusted 224,500.
- The U.S. created 213,000 jobs in June. May was revised upwards to 244,000 and April to 175,000.
- The unemployment rate rose to 4.0% in June from 3.8% in May as 601,000 people entered the workforce.
- From a year earlier wages rose 2.7%.
- The Energy Information Administration weekly report is here wpsrsummary. Also the EIA reported
- Field production of crude oil has been rounded to the nearest 100,000 barrels per day for the five weeks. So essentially, for the past four weeks it has held steady at 10,900 barrels per day.
- Storage of natural gas rose 78BN cubic feet.
- According to Baker Hughes, In the past week the number of active oil rigs rose 5 to 863 and the number of active gas rigs was unchanged at 187.
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Loren C. Rex, CFP®, AIF®, MA Erik A Smith
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
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Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
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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.