Stock indices ended the week mixed with gains in the Russell 2000 small cap index and losses in emerging markets and the Nasdaq 100 Index. Generally, earnings announcements were strong but Amazon disappointed and lowered expectations for post pandemic online shopping growth. While Covid-19 cases and hospitalizations have risen among the unvaccinated due to the delta variant, it is doubtful that stay at home orders will return. Still the uncertainty is causing some businesses to delay returns to the office or reinstate mask requirements.
A bipartisan infrastructure bill cleared two hurdles in the Senate with 17 Republican votes. The bill may pass the Senate next week. House Speaker Nancy Pelosi plans to link its passage with a 3.5TN antipoverty and healthcare package. However, at least one Democratic senator has announced opposition to the $3.5TN size and all 50 Democratic senators would have to vote to pass that via reconciliation.
The FED met this week and while noting that the economy has progressed towards its goals, they did not make any changes to monetary policy. They did say that progress would be assessed in coming meetings. That was taken as an indication that the FED may start to taper bond purchases at its September or November meetings. Fed Chairman Powell did say that the FED was nowhere near considering plans to raise interest rates.
Treasury yields fell sharply with the 30-year bond yield closing at 1.899% and the 10-Year note closing at 1.233%. Crude oil rose to $73.81 a barrel and natural gas fell to $3.924 per MMBTUs. The U.S. dollar index fell to 92.14 and gold rose to $1816.70 an ounce.
In the economic numbers this week:
- The Commerce Department Reported
- Sales of new homes fell 6.6% in June to the lowest level since April 2020. Increasing construction costs and low inventories were blamed for the decrease.
- The median sales price of a new home has risen 6.1% from a year earlier to $361,800.
- Durable goods orders rose 0.8% in June from May. May’s increase was revised up from 2.3% to 3.2%.
- Capital goods orders for non-defense and aircraft, the core durable goods, rose 0.5%.
- 2nd Quarter gross domestic product rose at a 6.5% annual rate. While the second quarter number came in below expectations the size of GDP is now greater than before the pandemic. Rising inflation, supply chain disruptions and a shortage of available workers limited growth.
- Personal-consumption expenditures rose 1.0% in June from a downwardly revised -0.1% in May. Adjusted for inflation expenditures rose 0.5% in June.
- The Personal-consumption price index rose 0.5% in June, less than the 0.7% expected. From a year earlier the index was up 4.0%. This is the FED’s preferred measure of inflation.
- Core prices, excluding volatile food and energy, were up 0.4% in June and 3.5% from a year earlier, the largest increase since 1991.
- Wages and salaries rose 0.8% in June.
- The S&P CoreLogic Case-Shiller National Home Price Index rose a record 16.6% in May from a year ago up from 14.8% year over year in April.
- The Labor Department reported:
- A seasonally adjusted 400,000 workers filed initial claims for unemployment in the week ending July 24th, down 24,000 from a revised 424,000 the week before.
- The 4-week moving average of claims, designed to smooth out volatility, rose to 394,500.
- Continuing claims were little changed at 3.2M in the week ending July 17th.
- A broader measure of claims including extended benefits, pandemic assistance and other programs rose from 12.6MM to 13.2MM in the week ending July 10th.
- 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 fell from 11.4MMBPD to 11.2MMBPD.
- Natural gas storage rose 36BN cubic feet and is below the 5 year average at this time of year.
- Baker Hughes reported the number of active oil rigs fell 2 to 388. The number of active natural gas rigs fell 1 to 103.
- Factset reported with 59% of S&P500 companies reporting 2nd quarter earnings, the blended earnings growth rate is 85.1% from the second quarter last year.
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Loren C. Rex, CFP®, MA Erik A Smith AIF®
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
Toll Free: 800-513-8180
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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.