Weekly Market Update | Week 36, 2024


Worst Week in 18 Months

Equities came under notable pressure following Friday’s August payrolls report, last week’s crucial release. Headline came in a bit weaker than consensus and prior months revised lower (again), but little movement in unemployment rate which has been a big focus of commentary. Soft-landing scenario still seems to be supported by the data, but report ultimately did not itself provide much additional support for a potential 50bp rate cut in September. 

The S&P 500 posted its worst weekly performance since March 23’ and Nasdaq since Jan 22’. Small caps also sold off with the Russell 2000 trailing the S&P 500 and posting its second-worst week of the year. Big tech was mostly lower with NVDA -13.9% the biggest drag, while the group collectively fell below its 100 DMA. Treasuries saw another big rally across the curve with yields falling to the lowest levels since early-to-mid 2023. Gold was down 0.1%. Copper was down 3.3%. Bitcoin futures were down 8.6%, falling below $55K. WTI crude was down 8%, the biggest weekly selloff since March 23’.

Last week’s shift in Fed and rate expectations also drove another sizable Treasury rally. The 2Y fell below 3.70% and 10Y yields under 3.75%, while the 2Y/10Y spread uninverted, ending the week around +6 bp after finishing in positive territory on Thursday for the first time since July 2022. While a number of economists have noted that the re-steepening of the yield itself is historically a recession indicator, Jefferies noted this week prior yield curve flips back into positive territory tend to be followed by solid SPX performance on the 6- and 12-month horizons.

August nonfarm payrolls up 142K vs consensus for ~165K in August (though prior two months revised down by a combined 86K jobs). Closely watched unemployment rate ticked down to 4.2% from 4.3%, though very little changed on unrounded basis. Average hourly earnings up 0.4% m/m, slightly ahead of expectations. Results come after previews flagged risks in both directions amid the slower pace of job creation and following some of the temporary issues that seemed to weigh on August. In today’s Fedspeak, Williams said Fed policy has been effective in stabilizing inflation and it is now appropriate to lower rates. Waller also said rate cuts are now appropriate, and cited the moderating labor market (observed August data a bit below breakeven point that would keep unemployment rate constant).

The payrolls report followed other soft data last week, including Wednesday’s July JOLTS job openings of 7.673M that came in well below 8.1M consensus and the lowest since Jan-21. The Beige Book also offered some cautious takeaways, including nine of the 12 districts reporting flat or declining activity. Tuesday’s August ISM Manufacturing was a bit better than consensus though remained in contraction territory. ISM Services beat, though the employment index ticked down 0.9 to 50.2. The commodity space also offered some cautious growth signals this week with oil prices falling to the lowest level since mid-2023, though some said that also plays into the soft landing theme and reduces the odds of a snapback in inflation after the Fed cuts. CME FedWatch Tool indicating probability of 50 bp cut in September at ~60%, up from ~40% prior to jobs report.

Fixed Income:

Yield Curve:

July  FOMC Statement   June Minutes   Credit, Liquidity and Balance Sheet    Federal Reserve Dot Plots  

Treasury.gov yields    FOMC Policy Normalization Statement     Longer- Run Goals Jan 2024

Foreign Exchange Market –

Energy Complex-  

The Baker Hughes rig count  was down 1 this week. There are 582 oil and gas rigs operating in the US – Down 50 from last year. 

Metals Complex-   

 Employment Picture 

August Jobs Report BLS Summary Released 9/6/2024 – The US Economyadded 142k nonfarm jobs in August and the Unemployment rate decreased 0.1% to 4.2%. Average hourly earnings increased 14 cents to $35.21.  Hiring highlights include +31k Healthcare and +34k Construction.

  • Average hourly earnings increased 14 cents/0.4% to $35.21.
  • U3 unemployment rate decreased 0.1% to 4.2%. U6 unemployment rate increased 0.1% to 7.9%.
  • The labor force participation rate was unchanged at 62.7%.
  • Average work week increased 0.1 to 34.3 hours.

Weekly Unemployment Claims – Released Thursday 9/5/2024 – In the week ending August 31, the advance figure for seasonally adjusted initial claims was 227,000, a decrease of 5,000 from the previous week’s revised level. The 4-week moving average was 230,000 a decrease of 1,750 from the previous week’s revised average.

Job Openings & Labor Turnover Survey JOLTS – Released 9/4/2024 – The number of job openings was little changed at 7.7 million on the last business day of July, the U.S. Bureau of Labor Statistics reported. Over the month the number of hires and total separations was little changed at 5.5 million and 5.4 million, respectively. Within separations, quits (3.3 million) and discharges (1.8 million) changed little.

Employment Cost Index – Released 7/31/2024 – Compensation costs for civilian workers increased 0.9% for the 3-month period ending in June 2024. Wages and salaries increased 0.9% and benefit costs increased 1.0% from March 2024. The 12-month period ending in June 2024 saw compensation costs increase by 4.1. The 12-month period ending June 2023 increased 4.5%. Wages and salaries increased 4.2 percent over the 12-month period ending in June 2024 and increased 4.6 percent for the 12-month period ending in June 2023. Benefit costs increased 3.8 percent over the 12-month period ending June 2024 and increased 4.2 percent for the 12-month period ending in June 2023. This report is published quarterly

This Week’s Economic Data – Blue links take you to data source

PMI Non-Manufacturing Index – Released 9/5/2024 – Economic activity in the services sector expanded in August for the second consecutive month indicating expansion in six of the eight months of 2024. The Services PMI® registered 51.5 percent, 0.1 percentage higher than July’s reading of 51.4 percent. 

U.S. Trade Balance – Released 9/4/2024 – The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $78.8 billion in July, up $5.8 billion from $73.0 billion in June. July exports were $266.6 billion, $1.3 billion more than June exports. July imports were $345.4 billion, $7.1 billion more than June imports. The July increase in the goods and services deficit reflected an increase in the goods deficit of $5.6 billion to $103.1 billion and a decrease in the services surplus of $0.2 billion to $24.3 billion.

U.S. Construction Spending Released 9/3/2024 – Construction spending during July 2024 was estimated at a seasonally adjusted annual rate of $2,162.7 billion, 0.3 percent below the revised June estimate of $2,169.0 billion. The July figure is 6.7 percent above the July 2023 estimate of $2,027.4 billion.

PMI Manufacturing Index – Released 9/3/2024 – The August Manufacturing PMI registered 47.2 percent, up 0.4 percent from 46.8 percent in July. The manufacturing sector contracted in August for the fifth consecutive month and the 21th time in the last 22 months. The overall economy continued in expansion for the 52nd month after one month of contraction in April 2020. The New Orders Index remained in contraction territory at 44.6 percent, 2.8 percentage points lower than the figure of 47.4 percent recorded in July. The Production Index reading of 44.8 percent is a 1.1-percentage point decrease compared to July’s figure of 45.9 percent.

Recent Economic Data – Blue Links bring you to data source

US Light Vehicle Sales – Released 8/30/2024 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 15.825 million units in July.

Chicago PMI – Released 8/30/2024 – Chicago PMI remained in contraction territory in August but increased to 46.1 points up from 45.3 points in June. The latest reading indicated that Chicago’s economic activity contracted for the ninth consecutive month in August. The marginal upward movement was driven by new orders, followed by production and supplier deliveries.

Personal Income – Released 8/30/2024 – Personal income increased $75.1 billion (0.3 percent at a monthly rate) in July. Disposable personal income (DPI)—personal income less personal current taxes—increased $54.8 billion (0.3 percent). Personal consumption expenditures (PCE) increased $103.8 billion (0.5 percent).

Second Estimate of 2nd Quarter 2024 GDP – Released 8/29/2024 – Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of 2024, according to the “second” estimate released by the Bureau of Economic Analysis. The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month.  In the advance estimate, the increase in real GDP was 2.8 percent. In the first quarter, real GDP increased 1.4 percent. The update primarily reflected an upward revision to consumer spending. The increase in real GDP primarily reflected increases in consumer spending, private inventory investment, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.  

Consumer Confidence – Released 8/27/2024 – Consumer Confidence increased from 101.9 to 103.3 in August. The expectations index improved from 81.1 to 82.5. Consumers continued to express mixed feelings in August. Compared to July, they were more positive about business conditions, both current and future, but also more concerned about the labor market. Consumers’ assessments of the current labor situation, while still positive, continued to weaken, and assessments of the labor market going forward were more pessimistic. This likely reflects the recent increase in unemployment. Consumers were also a bit less positive about future income.

Durable Goods – Released 8/26/2024 – New orders for manufactured durable goods in July, up five of the last six months, increased $26.1 billion or 9.9 percent to $289.6 billion, the U.S. Census Bureau announced today. This followed a 6.9 percent June decrease. Excluding transportation, new orders decreased 0.2 percent. Excluding defense, new orders increased 10.4 percent. Transportation equipment, up two of the last three months, led the increase, $26.4 billion or 34.8 percent to $102.2 billion.  Shipments of manufactured durable goods in July, up five of the last six months, increased $3.1 billion or 1.1 percent to $291.1 billion. This followed a 1.2 percent June increase. Transportation equipment, also up five of the last six months, drove the increase, $3.4 billion or 3.6 percent to $99.2 billion.

New Residential Sales Released 8/23/2024 – Sales of new single‐family houses in July 2024 were at a seasonally adjusted annual rate of 739,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. 

This is 10.6 percent above the revised June rate of 668,000 and is 5.6 percent above the July 2023 estimate of 700,000. The median sales price of new houses sold in July 2024 was $429,800.  The average sales price was $514,800. 

Existing Home Sales – Released 8/22/2024 – Existing home sales in July increased 1.3% from June but fell 2.5% year over year. Existing home sales increased to 3.95 million in June seasonally adjusted. The median price of existing homes for sale increased to a record high of $422,600.

Housing Starts – Released 8/16/2024 – July housing starts came in at 1,238,000, 6.8% below the June estimate but is 16.0% below the July 2023 rate. Building permits were 4.0% below the June rate at $1,454,000 and is 7.0% below the July 2023 rate. 

Industrial Production and Capacity Utilization – Released 8/15/2024 – Industrial production decreased 0.6% in July. Early July shutdowns concentrated in the petrochemical and related industries due to Hurricane Beryl held down the growth of industrial production by an estimated 0.3%. Manufacturing decreased 0.3%. Utilities output decreased 3.7%. Mining was flat. Total industrial production in July was 0.2% lower than its year-earlier level. Capacity utilization decreased to 77.8% in July, a rate that is 1.9% below its long-run average.

Retail Sales Released 8/15/2024 – Headline retail sales exceeded expectations, up 1.0% in July and are up 2.7% above July 2023.

Consumer Price Index – Released 8/14/2024 – The Consumer Price Index for All Urban Consumers increased 0.2% in July on a seasonally adjusted basis, after declining 0.1% in June. Over the last 12 months, the all items index increased 2.9 percent before seasonal adjustment.

Producer Price Index – Released 8/13/2024 – The Producer Price Index for final demand increased 0.1 percent in July, seasonally adjusted. Final demand increased 0.2 percent in June. On an unadjusted basis, the index for final demand moved up 2.2 percent for the 12 months ended in July.

Consumer Credit – Released 8/7/2024 – Consumer credit increased at a seasonally adjusted annual rate of 2.4 percent in the second quarter and increased at 2.1 percent in June. Revolving credit increased at an annual rate of 1.2 percent, while nonrevolving credit increased at an annual rate of 2.9 percent.

This week we get data on Consumer Credit, PPI, and CPI.

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Data Sources: 

Conference Board Economic Indicators   Bureau of Economic Analysis (BEA)   Congressional Budget Office (CBO)     U.S. Bureau of Labor Statistics (BLS)    Federal Reserve Economic Data (FRED Charts)

CME Fed Watch   U.S. Treasury – Yields   U.S. Census Bureau    Institute for Supply Management (ISM)    Weekly DOL Employment Data    BLS Monthly Jobs Report    JOLTS      All capital in one visualization 2020

US Energy Admn (EIA)   BLS Consumer Price Index CPI      BLS Producer Price Index PPIAtlanta Fed GDPNOW    NY Fed Nowcast GDP     US Census Bureau Housing Starts   U.S. Energy Admn

Consumer Credit  USCB Retail Sales   Construction Spending      Federal Reserve Dot Plots 2017   NY Empire Index    Philadelphia Federal Reserve   P/E Ratio Data -Yardeni Research

Technical Analysis Info: Koyfin.com  StockCharts.com – Financial Charts    Exponential vs Simple Moving Average

Other links: 1973 Arab Oil Embargo    Hunt Brothers Silver    Asian Contagion   Long-Term Capital bailout