Stock indices ended the week mixed with the biggest gains in the Dow 30 Industrials and the biggest drop in the Russell 2000 small cap index.
The Consumer-price index rose more slowly in July compared to the month of June. However, the producer-price index rose at a faster rate in July.
The Senate passed a bi-partisan $1TN infrastructure bill which increases funding for roads, bridges and broadband internet over the next decade. Over half of the infrastructure bill is money repurposed from previously approved funds. The Senate also passed a $3.5TN budget framework with only Democratic votes. The framework merely opens the door for funding via the reconciliation process. Two Democratic Senators, while voting for the framework, have expressed concern over the size of the spending. House speaker, Nancy Pelosi, intended not to bring the infrastructure bill up for a vote until the budget framework is passed by the House. However, nine centrist House Democrats sent a letter to Nancy Pelosi that they will “not consider voting for a budget resolution until” the House approves the infrastructure bill. They also wrote, “With the livelihood of hardworking American families at stake, we simply can’t afford months of unnecessary delays and risk squandering this once-in-a-century, bipartisan infrastructure package.” Without these votes, the budget framework would not have enough Democratic votes to pass.
As the economy is recovering from the disruptions caused by the pandemic last year we thought we should mention the situation regarding those who are facing evictions. While the CDC issued a new eviction moratorium, it is likely to be thrown out by the time it reaches the Supreme Court. In December, Congress approved $46.6BN in rental assistance but as of June 30th only $3BN had been distributed. While this is a federal program, the assistance depends on more than 450 organizations to distribute aid. These include state, county, municipal governments and charitable organizations and getting the payments up and running has been slow. However, the pace of distributions is picking up with June distributions exceeding the previous three months.
Treasury yields fell with the 30-year bond yield closing at 1.930% and the 10-Year note closing at 1.286%. Crude oil fell to $68.01 a barrel and natural gas fell to $3.849 per MMBTUs. The U.S. dollar index fell to 92.52 and gold rose to $1781.10 an ounce.
In the economic numbers this week:
- China reported
- Factory-gate prices rose 0.5% in July and 9.0% from a year earlier up from June’s 8.8% year over year increase in June. Higher commodity prices, particularly coal and oil were attributed for the increase.
- Consumer prices rose only 1.0% in July from a year earlier, down from 1.1% in June. The small increase was due to a 3.7% drop in food prices that were elevated in 2020 due to African Swine Fever in pigs. Nonfood prices in July were up 2.1% in June from a year earlier, up from 1.7% in June.
- Looking forward it is expected that inflation will cool in August and September due to pandemic measures in response to the Delta Variant Covid-19 cases.
- The Labor Department reported:
- The consumer price index rose 0.5% in July down from 0.9% increase in June. From a year earlier it was up 5.4%. Excluding volatile food and energy, core prices rose 0.3% in July and 4.3% from a year earlier. Prices of air travel, apparel, entertainment and recreation remain below pre-pandemic levels.
- The producer-price index rose 1.0% in the month of July and 7.8% from a year earlier. Core prices, excluding volatile food and energy rose 0.9% in July and 6.2% from a year ago. Three quarters of the July increase was due to a 1.1% increase in services. Wholesale goods price rose only 0.6%, down from a 1.2% increase in June. Approximately 20% of the goods gain was due to a sharp increase in cold-rolled steel and strip.
- A seasonally adjusted 375,000 workers filed initial claims for unemployment in the week ending August 7th, down 12,000 from a revised 387,000 the week before.
- The 4-week moving average of claims, designed to smooth out volatility, rose to 396,250.
- Continuing claims were 2.8MM down from a revised 2.9M in the week ending July 31st.
- A broader measure of claims including extended benefits, pandemic assistance and other programs fell from 13.1MM to 12.1MM in the week ending July 24th.
- 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 rose from 11.2MMBPD to 11.3MMBPD.
- Natural gas storage rose 49BN cubic feet and is below the 5 year average at this time of year.
- Baker Hughes reported the number of active oil rigs rose 10 to 397. The number of active natural gas rigs fell 1 to 102.
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Loren C. Rex, CFP®, MA Erik A Smith, AIF®
President Managing Partner
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