Stocks ended the week with significant loses.
The markets rallied on Tuesday following the release of many global flash purchasing managers indices showing improvements in June from May. Full PMI numbers to come next week.
On Wednesday, the markets sold off following a downgraded forecast from the International Monetary Fund, predicting the global economy will contract 4.9% this year down from 3% previously forecast. Also, impacting the markets was the surge in Covid cases in Florida, Arizona, Texas and California. In addition, the Trump administration threatened tariffs on about 3.1 BN worth of European imports based on aircraft subsidies.
Financial stock were whipsawed this week. On Thursday bank stocks rose sharply following the FDIC announcement, with the FEDs approval to:
- Allow banks to invest in venture capital funds.
- Reduce reserves required to backstop derivative trades.
- Banks will no longer need to use margin for inter-affiliate swap trades.
However, on Friday the Federal Reserve moved to prohibit bank share buybacks through the third quarter and to cap dividends causing bank stocks to selloff.
The selloff in the broader market resumed on Friday as southern states from the Carolinas to California saw a rapid increase in cases and in the case of Texas a rollback of their aggressive reopening. Also, on Friday was news that China has threatened to halt promised agricultural purchases if the U.S. imposes sanctions passed by the Senate over the crackdown on Hong Kong.
Treasury yields fell with the 30-year bond ending at 1.376% and the 10-Year note at 0.649%. Crude oil fell to $38.20 a barrel and natural gas fell to $1.546 per MMBTUs. The U.S. dollar index ended the week higher and gold prices rose to $1785.00 an ounce.
In the economic numbers this week:
- The National Association of Realtors reported that existing home sales fell 9.7% in the month of May as the pandemic kept people from looking at homes. Existing home sales hit a 13-year high in February.
- The Commerce Department reported
- Personal spending rose a record 8.2% in May as stores reopened and people spent their stimulus money. This was the largest jump in records going back to 1959 and follows a record 13.6% drop in April. The largest increases were in long lasting items like cars, appliances and furniture.
- Household income fell 4.2% in May following a 13.6% jump in April. May’s income still exceeded February due to stimulus payments and enhanced unemployment benefits.
- The personal savings rate was 23.2% in May down from a record high of 32.2 April but far above the 8.4% in February.
- The personal-consumption expenditures price index rose 0.1% in May and only 0.5% from a year earlier. Excluding volatile food and energy prices also rose 0.1% in May but 1.0% from a year earlier.
- The Labor Department reported:
- 1.48MM workers filed initial unemployment claims last week, down from the upwardly revised 1.54MM in the prior week.
- Continuing claims fell from 20.5MM to 19.5MM as some return back to work.
- The EIA weekly oil report is here wpsrsummary (6). Also, the EIA reported in the past week:
- Field production of crude oil rose from 10.5M barrels to 11.0MM barrels per day. The peak production at the end of February was 13.1MM barrels per day.
- Natural gas storage rose by 120BN cubic feet and is above the five year average at this time of year.
- Baker Hughes reported the number of active oil rigs fell 1 to 188 and the number of active natural gas rigs was unchanged at to 75.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF®, MA Erik A Smith AIF®
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
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.