US equities were lower this week as the S&P 500 broke a five-week streak of weekly gains and Nasdaq an eight-week streak. Underperformers included energy, precious metals miners, semis, chemicals, banks, credit cards, fund managers, autos, apparel, and hotels and casinos. Big tech was mixed, while some of the better performers included homebuilders, trucking, managed care and healthcare distributors. Treasuries were mixed with the curve flattening, with the 2Y/10Y spread back near -100 bp. The dollar index was up 0.7%, with notable strength against the yen. Gold was down 2.1%. Bitcoin futures were up 17%, back above $31K for the highest level in a year. WTI crude ended the week down 3.9%.
It was an uneventful week with few changes to the broader themes. Higher-for-longer Fed policy remains a key piece of the bearish narrative. While there was little new from Fed Chair Powell’s appearance on Capitol Hill this week, Powell reiterated that two hikes (matching last week’s dot plot) were a good guess if the economy performs as expected (NY Times). Bank of America analysts flagged the $2B in outflows from tech stocks in the week to 21-Jun, as investors sell following a “baby bubble.” Goldman Sachs strategists also flagged downside risks this week, including bullish options positions, narrow breadth, high valuations, elevated growth expectations, and a 25% chance of recession (Bloomberg). There was also some press focus this week on the yield curve and recession signaling (FT), bank regulatory uncertainty (Axios), and fading fiscal support and liquidity tailwinds (Bloomberg).
However, some key bullish arguments include soft landing expectations, disinflation traction (NY Times), and some pushback against the stretched valuation argument. Credit Suisse noted the median stock is trading at just 17x P/E, or slightly above the 16.2x long-term average. Some Fedspeak outside of Powell this week also leaned dovish (including Atlanta’s Bostic), while markets are pricing in a year-end median fed funds rate of 5.27%, or only slightly above the current policy range of 5.0-5.25%.
Data this week mostly offered support for the soft landing narrative. Friday’s flash manufacturing PMI missed, but input prices fell at the fastest pace since May-20 and selling price inflation was the slowest since the inflationary cycle began over three year ago. Flash services PMI was in line with business confidence the highest since May-22, though cost inflation steepest in five months on higher wages. Strong housing data was also in focus with June NAHB builder confidence the highest since Jul-22, May housing starts and permits were well ahead of consensus, including the biggest jump in starts since 1990 (Reuters), while May existing home sales also posted a surprise increase. However, initial jobless claims rose to a 20-month high, with Citi economists saying the recent increase in claims is consistent with previous NBER recession starts.
Next week should be a bit busier. Data include Tuesday’s May durable goods and new home sales, as well as June consumer confidence. Data Thursday include final Q1 GDP and pending home sales, while Friday’s data include May PCE and final Michigan Consumer Sentiment. Fed bank stress tests are also set for release on Wednesday
The Baker Hughes rig count was down by 5 this week. There are 682 oil and gas rigs operating in the US – down 71 over last year.
Metals Complex
Employment Picture
Weekly Unemployment Claims – Released Thursday 6/22/2023 – In the week ending June 17, the advance figure for seasonally adjusted initial claims was 262,004, unchanged from the previous week’s revised level. The 4-week moving average was 255,750, an increase of 8,500 from the previous week’s revised average.
May Jobs Report – BLS Summary – Released 6/2/2023 – The US Economyadded 339k nonfarm jobs in May and the Unemployment rate increase 0.3% to 3.7%. Average hourly earnings increased 11 cents to $33.44. Hiring highlights include +48k Leisure and Hospitality, +97k Education and Health Services, +56 Government, and +64k Professional and Business Services.
Average hourly earnings increased 11 cents/0.3% to $33.44.
U3 unemployment rate increased 0.3% to 3.7%. U6 unemployment rate increased 0.1% to 6.7%.
The labor force participation rate was unchanged at 62.6%.
Average work week declined 0.1 hours to 34.3 hours.
Job Openings & Labor Turnover Survey JOLTS – Released 5/31/2023 – The number of job openings increased to 10.1 million on the last business day of April, the U.S. Bureau of Labor Statistics reported. Over the month the number of hires and total separations changed little at 6.1 million and 5.7 million, respectively. Within separations, quits (3.8 million) changed little and layoffs and discharges (1.6 million) changed little.
Employment Cost Index– Released 4/28/2023 –Compensation costs for civilian workers increased 1.2% for the 3-month period ending in March 2023. The 12-month period ending in March 2023 saw compensation costs increase by 4.8. The 12-month period ending March 2022 increased 4.5%. Wages and salaries increased 5.0 percent over the 12-month March 2023 and increased 4.7 percent for the 12-month period ending in March 2022. Benefit costs increased 4.5 percent over the 12-month period ending March 2023 and increased 4.1 percent for the 12-month period ending in March 2022. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Existing Home Sales – Released 6/22/2023 – May 2023 brought 4.30 million in sales, an increase of 0.2% from April. The median sales price was $396,100. The current unsold housing inventory was 3.0 months of inventory.
Housing Starts – Released 6/20/2023 –May housing starts came in at 1,613,000, 21.7% above the April estimate and 5.7% above the May 2022 rate. Building permits were 5.2% above the April rate at $1,491,000 but 12.7% below the May 2022 rate.
Recent Economic Data
Links take you to the data source
Industrial Production and Capacity Utilization – Released 6/15/2023 – Industrial production decreased 0.2% in May. Utilities output fell 1.8%. Manufacturing increased 0.1%. Mining fell 0.4%. Capacity utilization declined to 79.6% in May, 0.1% below the long-run average.
Retail Sales– Released 6/15/2023 –Headline retail sales increased 0.3% in May and are up 1.6% above May 2022.
Producer Price Index – Released 6/14/2023 – The Producer Price Index for final demand declined 0.3 percent in May, seasonally adjusted. Final demand prices rose 0.2 percent in April and fell 0.4 in March. On an unadjusted basis, the index for final demand moved up 1.1 percent for the 12 months ended in May.
Consumer Price Index– Released 6/13/2023 – The Consumer Price Index for All Urban Consumers rose 0.1 percent in May on a seasonally adjusted basis, after increasing 0.4 percent in April. Over the last 12 months, the all-items index increased 4.0 percent before seasonal adjustment.
Consumer Credit– Released 6/7/2023 – Consumer credit increased at a seasonally adjusted annual rate of 5.7 percent in April. Revolving credit increased at an annual rate of 13.1 percent, while nonrevolving credit increased at an annual rate of 3.2 percent.
U.S. Trade Balance– Released 6/7/2023 –The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $74.6 billion in April, up $14.0 billion from $60.6 billion in March. April exports were $249.0 billion, $9.2 billion less than March exports. April imports were $323.6 billion, $4.8 billion more than March imports. The April increase in the goods and services deficit reflected a increase in the goods deficit of $14.5 billion to $96.1 billion and an increase in the services surplus of $0.6 billion to $21.6 billion.
PMI Non-Manufacturing Index – Released 6/5/2023 – Economic activity in the services sector expanded in May for the fifth consecutive month as the Services PMI® registered 50.3 percent, 1.6 percentage points lower than April’s reading of 51.9 percent. The composite index indicated growth in May for the fifth consecutive month after a reading of 49.2 percent in December, the first contraction since May 2020.
U.S. Construction Spending – Released 6/1/2023 – Construction spending during April 2023 was estimated at a seasonally adjusted annual rate of $1,908.4 billion, 1.2 percent above the revised March estimate of $1,885.0 billion. The April figure is 7.2 percent above the April 2022 estimate of $1,780.9 billion.
PMI Manufacturing Index –Released 6/1/2023 – The May Manufacturing PMI registered 46.9 percent, 0.2 percentage points lower than the 47.1 percent recorded in April. Regarding the overall economy, this figure indicates a sixth month of contraction after a 30-month period of expansion. The New Orders Index remained in contraction territory at 42.6 percent, 3.1 percentage points lower than the figure of 45.7 percent recorded in April. The Production Index reading of 51.1 percent is a 2.2-percentage point increase compared to April’s figure of 48.9 percent.
Chicago PMI– Released 5/31/2023 – Chicago PMI remained in contraction territory in May, crashing to 40.4 points down from 48.6 points in April. This marks nine months in contractionary territory.
Consumer Confidence– Released 5/30/2023 – Consumer Confidence fell in May to 102.3, down from 103.7 in April.
US Light Vehicle Sales – Released 5/26/2023 –U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 15.915 million units in April.
Personal Income –Released 5/26/2023 – Personal income increased $80.1 billion (0.4 percent at a monthly rate) in April. Disposable personal income (DPI) increased $79.4 billion (0.4 percent). Personal outlays increased $156.0 billion (0.8 percent) and consumer spending increased $151.7 billion (0.8 percent). Personal saving was $802.1 billion and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.1 percent in April.
Durable Goods – Released 5/26/2023 – New orders for manufactured durable goods in April, up two consecutive months, increased $3.1 billion or 1.1 percent to $283.0 billion, the U.S. Census Bureau announced today. This followed a 3.3 percent March increase. Excluding transportation, new orders decreased 0.2 percent. Excluding defense, new orders decreased 0.6 percent. Transportation equipment, also up two consecutive months, drove the increase, $3.5 billion or 3.7 percent to $97.6 billion. Shipments of manufactured durable goods in April, down two of the last three months, decreased $2.0 billion or 0.7 percent to $277.7 billion. This followed a 0.7 percent March increase.
2nd Estimate of 1st Quarter 2023 GDP – Released 5/25/2023 – Real gross domestic product (GDP) increased at an annual rate of 1.3 percent in the first quarter of 2023, according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.6 percent.
New Residential Sales – Released 5/23/2023 – Sales of new single‐family houses in April 2023 were at a seasonally adjusted annual rate of 683,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.1 percent above the revised March rate of 656,000 and is 11.8 percent above the April 2022 estimate of 611,000. The median sales price of new houses sold in April 2023 was $420,800. The average sales price was $501,000.
Next week we get data on New Residential Sales, the 3rd Estimate of 1st Quarter GDP, Durable Goods, Personal Income, Consumer Confidence, and Chicago PMI.
Table of Contents
Good Life Advisors – Talking Points – Week 25
US equities were lower this week as the S&P 500 broke a five-week streak of weekly gains and Nasdaq an eight-week streak. Underperformers included energy, precious metals miners, semis, chemicals, banks, credit cards, fund managers, autos, apparel, and hotels and casinos. Big tech was mixed, while some of the better performers included homebuilders, trucking, managed care and healthcare distributors. Treasuries were mixed with the curve flattening, with the 2Y/10Y spread back near -100 bp. The dollar index was up 0.7%, with notable strength against the yen. Gold was down 2.1%. Bitcoin futures were up 17%, back above $31K for the highest level in a year. WTI crude ended the week down 3.9%.
It was an uneventful week with few changes to the broader themes. Higher-for-longer Fed policy remains a key piece of the bearish narrative. While there was little new from Fed Chair Powell’s appearance on Capitol Hill this week, Powell reiterated that two hikes (matching last week’s dot plot) were a good guess if the economy performs as expected (NY Times). Bank of America analysts flagged the $2B in outflows from tech stocks in the week to 21-Jun, as investors sell following a “baby bubble.” Goldman Sachs strategists also flagged downside risks this week, including bullish options positions, narrow breadth, high valuations, elevated growth expectations, and a 25% chance of recession (Bloomberg). There was also some press focus this week on the yield curve and recession signaling (FT), bank regulatory uncertainty (Axios), and fading fiscal support and liquidity tailwinds (Bloomberg).
However, some key bullish arguments include soft landing expectations, disinflation traction (NY Times), and some pushback against the stretched valuation argument. Credit Suisse noted the median stock is trading at just 17x P/E, or slightly above the 16.2x long-term average. Some Fedspeak outside of Powell this week also leaned dovish (including Atlanta’s Bostic), while markets are pricing in a year-end median fed funds rate of 5.27%, or only slightly above the current policy range of 5.0-5.25%.
Data this week mostly offered support for the soft landing narrative. Friday’s flash manufacturing PMI missed, but input prices fell at the fastest pace since May-20 and selling price inflation was the slowest since the inflationary cycle began over three year ago. Flash services PMI was in line with business confidence the highest since May-22, though cost inflation steepest in five months on higher wages. Strong housing data was also in focus with June NAHB builder confidence the highest since Jul-22, May housing starts and permits were well ahead of consensus, including the biggest jump in starts since 1990 (Reuters), while May existing home sales also posted a surprise increase. However, initial jobless claims rose to a 20-month high, with Citi economists saying the recent increase in claims is consistent with previous NBER recession starts.
Next week should be a bit busier. Data include Tuesday’s May durable goods and new home sales, as well as June consumer confidence. Data Thursday include final Q1 GDP and pending home sales, while Friday’s data include May PCE and final Michigan Consumer Sentiment. Fed bank stress tests are also set for release on Wednesday
Fixed Income
Yield Curve
May FOMC Statement March Fed Minutes Balance Sheet Reduction Plan Credit, Liquidity and Balance Sheet Federal Reserve Dot Plots
Treasury.gov yields FOMC Policy Normalization Statement Longer- Run Goals Jan 2022
Foreign Exchange Market
Energy Complex
The Baker Hughes rig count was down by 5 this week. There are 682 oil and gas rigs operating in the US – down 71 over last year.
Metals Complex
Employment Picture
Weekly Unemployment Claims – Released Thursday 6/22/2023 – In the week ending June 17, the advance figure for seasonally adjusted initial claims was 262,004, unchanged from the previous week’s revised level. The 4-week moving average was 255,750, an increase of 8,500 from the previous week’s revised average.
May Jobs Report – BLS Summary – Released 6/2/2023 – The US Economy added 339k nonfarm jobs in May and the Unemployment rate increase 0.3% to 3.7%. Average hourly earnings increased 11 cents to $33.44. Hiring highlights include +48k Leisure and Hospitality, +97k Education and Health Services, +56 Government, and +64k Professional and Business Services.
Job Openings & Labor Turnover Survey JOLTS – Released 5/31/2023 – The number of job openings increased to 10.1 million on the last business day of April, the U.S. Bureau of Labor Statistics reported. Over the month the number of hires and total separations changed little at 6.1 million and 5.7 million, respectively. Within separations, quits (3.8 million) changed little and layoffs and discharges (1.6 million) changed little.
Employment Cost Index – Released 4/28/2023 – Compensation costs for civilian workers increased 1.2% for the 3-month period ending in March 2023. The 12-month period ending in March 2023 saw compensation costs increase by 4.8. The 12-month period ending March 2022 increased 4.5%. Wages and salaries increased 5.0 percent over the 12-month March 2023 and increased 4.7 percent for the 12-month period ending in March 2022. Benefit costs increased 4.5 percent over the 12-month period ending March 2023 and increased 4.1 percent for the 12-month period ending in March 2022. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Existing Home Sales – Released 6/22/2023 – May 2023 brought 4.30 million in sales, an increase of 0.2% from April. The median sales price was $396,100. The current unsold housing inventory was 3.0 months of inventory.
Housing Starts – Released 6/20/2023 – May housing starts came in at 1,613,000, 21.7% above the April estimate and 5.7% above the May 2022 rate. Building permits were 5.2% above the April rate at $1,491,000 but 12.7% below the May 2022 rate.
Recent Economic Data
Links take you to the data source
Industrial Production and Capacity Utilization – Released 6/15/2023 – Industrial production decreased 0.2% in May. Utilities output fell 1.8%. Manufacturing increased 0.1%. Mining fell 0.4%. Capacity utilization declined to 79.6% in May, 0.1% below the long-run average.
Retail Sales – Released 6/15/2023 – Headline retail sales increased 0.3% in May and are up 1.6% above May 2022.
Producer Price Index – Released 6/14/2023 – The Producer Price Index for final demand declined 0.3 percent in May, seasonally adjusted. Final demand prices rose 0.2 percent in April and fell 0.4 in March. On an unadjusted basis, the index for final demand moved up 1.1 percent for the 12 months ended in May.
Consumer Price Index – Released 6/13/2023 – The Consumer Price Index for All Urban Consumers rose 0.1 percent in May on a seasonally adjusted basis, after increasing 0.4 percent in April. Over the last 12 months, the all-items index increased 4.0 percent before seasonal adjustment.
Consumer Credit – Released 6/7/2023 – Consumer credit increased at a seasonally adjusted annual rate of 5.7 percent in April. Revolving credit increased at an annual rate of 13.1 percent, while nonrevolving credit increased at an annual rate of 3.2 percent.
U.S. Trade Balance – Released 6/7/2023 – The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $74.6 billion in April, up $14.0 billion from $60.6 billion in March. April exports were $249.0 billion, $9.2 billion less than March exports. April imports were $323.6 billion, $4.8 billion more than March imports. The April increase in the goods and services deficit reflected a increase in the goods deficit of $14.5 billion to $96.1 billion and an increase in the services surplus of $0.6 billion to $21.6 billion.
PMI Non-Manufacturing Index – Released 6/5/2023 – Economic activity in the services sector expanded in May for the fifth consecutive month as the Services PMI® registered 50.3 percent, 1.6 percentage points lower than April’s reading of 51.9 percent. The composite index indicated growth in May for the fifth consecutive month after a reading of 49.2 percent in December, the first contraction since May 2020.
U.S. Construction Spending – Released 6/1/2023 – Construction spending during April 2023 was estimated at a seasonally adjusted annual rate of $1,908.4 billion, 1.2 percent above the revised March estimate of $1,885.0 billion. The April figure is 7.2 percent above the April 2022 estimate of $1,780.9 billion.
PMI Manufacturing Index – Released 6/1/2023 – The May Manufacturing PMI registered 46.9 percent, 0.2 percentage points lower than the 47.1 percent recorded in April. Regarding the overall economy, this figure indicates a sixth month of contraction after a 30-month period of expansion. The New Orders Index remained in contraction territory at 42.6 percent, 3.1 percentage points lower than the figure of 45.7 percent recorded in April. The Production Index reading of 51.1 percent is a 2.2-percentage point increase compared to April’s figure of 48.9 percent.
Chicago PMI – Released 5/31/2023 – Chicago PMI remained in contraction territory in May, crashing to 40.4 points down from 48.6 points in April. This marks nine months in contractionary territory.
Consumer Confidence – Released 5/30/2023 – Consumer Confidence fell in May to 102.3, down from 103.7 in April.
US Light Vehicle Sales – Released 5/26/2023 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 15.915 million units in April.
Personal Income – Released 5/26/2023 – Personal income increased $80.1 billion (0.4 percent at a monthly rate) in April. Disposable personal income (DPI) increased $79.4 billion (0.4 percent). Personal outlays increased $156.0 billion (0.8 percent) and consumer spending increased $151.7 billion (0.8 percent). Personal saving was $802.1 billion and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.1 percent in April.
Durable Goods – Released 5/26/2023 – New orders for manufactured durable goods in April, up two consecutive months, increased $3.1 billion or 1.1 percent to $283.0 billion, the U.S. Census Bureau announced today. This followed a 3.3 percent March increase. Excluding transportation, new orders decreased 0.2 percent. Excluding defense, new orders decreased 0.6 percent. Transportation equipment, also up two consecutive months, drove the increase, $3.5 billion or 3.7 percent to $97.6 billion. Shipments of manufactured durable goods in April, down two of the last three months, decreased $2.0 billion or 0.7 percent to $277.7 billion. This followed a 0.7 percent March increase.
2nd Estimate of 1st Quarter 2023 GDP – Released 5/25/2023 – Real gross domestic product (GDP) increased at an annual rate of 1.3 percent in the first quarter of 2023, according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.6 percent.
New Residential Sales – Released 5/23/2023 – Sales of new single‐family houses in April 2023 were at a seasonally adjusted annual rate of 683,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.1 percent above the revised March rate of 656,000 and is 11.8 percent above the April 2022 estimate of 611,000. The median sales price of new houses sold in April 2023 was $420,800. The average sales price was $501,000.
Next week we get data on New Residential Sales, the 3rd Estimate of 1st Quarter GDP, Durable Goods, Personal Income, Consumer Confidence, and Chicago PMI.
Data Sources:
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
US Energy Admin (EIA)
BLS Consumer Price Index CPI
BLS Producer Price Index PPI
Atlanta Fed GDPNOW
NY Fed Nowcast GDP
US Census Bureau Housing Starts
Consumer Credit
USCB Retail Sales
Construction Spending
Federal Reserve Dot Plots
NY Empire Index
Philadelphia Federal Reserve
P/E Ratio Data -Yardeni Research
Technical Analysis Info:
StockCharts.com – Financial Charts
Exponential vs Simple moving average
Koyfin.com
Other Links:
1973 Arab Oil Embargo
Hunt Brothers Silver
Long-Term Capital bailout
Asian Contagion
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