Stocks saw substantial gains for the week.
On Monday, news of FDA emergency approval for convalescent plasma for treating Covid propelled the markets higher. While some statistics were misstated, the treatment is still believed to be a positive step towards improving case outcomes.
On Tuesday, new home sales had their best month since October 2006, fueled by pent up demand from the lockdown and record low mortgage rates. However, possible headwinds may challenge this going forward. Foreclosure forbearance due to Covid, may cause banks to tighten lending standards. Also, lumber prices have risen more than 110% since April due to a combination of reduced production during Covid lockdowns and increased demand.
On Wednesday, strong durable goods orders pushed the markets higher.
On Thursday, the FED announced a change in its approach on inflation, that it would no longer raise interest rates to pre-empt inflation. Also, hurricane Laura hit at the Texas/Louisiana border causing approximately $15BN insured losses.
On Friday, the Commerce Department released information on consumer spending, saving and inflation.
Treasury yields rose with the 30-year bond yield at 1.507% and the 10-Year note at 0.728%. Crude oil rose to $42.97 a barrel and natural gas rose to $2.661 per MMBTUs. The U.S. dollar index fell to 92.32 and gold prices rose to $1972.30 an ounce.
In the economic numbers this week:
- CPB Netherlands Bureau for Economic Policy Analysis reported that global trade flows across borders were 12.5% lower in Q2 than in Q1, despite a rebound in the month of June.
- Government data showed new home sales rose 14% in July from June and are up 36% from July last year. This is the highest level since October 2006 fueled by record low mortgage rates.
- The S&P CoreLogic Case-Shiller National Home Price Index was 4.3% higher in June than June 2019. The year over year price increase was unchanged from May.
- The Commerce Department reported:
- Durable goods orders rose 11.2% in July. Orders for autos and parts soared 21.9%. Excluding transportation orders rose 2.4%
- Personal consumption expenditures rose a seasonally adjusted 1.9% in the month of July. This follows a 6.2% increase in June and 8.6% increase in May.
- Personal incomes rose 0.4% in July.
- The PCE price index, the one the FED follows, rose 0.3% in the month of July. Excluding food and energy, prices also rose 0.3%. From a year earlier, the index was up 1.0% and excluding food and energy was up 1.3%.
- The personal savings rate was 17.8% in July down from a peak of 33.7% in April but far above the single digit rates before Covid.
- The Labor Department reported:
- 1.0MM workers filed initial unemployment claims last week, down from 1.1MM in the prior week.
- Continuing claims fell from 14.8MM to 14.5MM.
- The EIA weekly oil report is here: wpsrsummary . Also, the EIA reported in the past week:
- Field production of crude oil rose from 10.7MM barrels per day to 10.8MM barrels per day.
- Natural gas storage rose by 45BN cubic feet and is above the highest level at this time of year during the past five years.
- Baker Hughes reported the number of active oil rigs fell 3 to 180. The number of active natural gas rigs rose 3 to 72.
- Factset reported with 98% of the S&P500 companies reporting Q2 earnings, the aggregate earnings decline was 37%. However, 84% of companies beat their earnings estimates for Q2.
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.