The S&P rose 1.6% this week and closed at 3025, another new all-time closing high for the index. The Nasdaq, mid-caps and small caps all advanced 2.0% or more. The Dow lagged at just a 0.1% gain – Earnings were in focus all week – Q2Earnings Scorecard from FactSet; (with 44% of the companies in the S&P 500 reporting actual results), 77% of those companies, reported a positive EPS surprise and 61% of companies have reported a positive revenue surprise. Earnings Growth: For Q2 2019, the blended earnings decline for the S&P 500 is -2.6%. If -2.6% is the actual decline for the quarter, it will mark the first time the index has reported two straight quarters of year-over-year declines in earnings since Q1 2016 and Q2 2016. Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.1. This P/E ratio is above the 5-year average (16.5) and above the 10-year average (14.8).
On the data front; Existing home sales decreased 1.7% month/m in June to a seasonally-adjusted annual rate of 5.27 million. Total sales were 2.2% lower than in the same period a year ago. New Home sales increased 7.0% m/m to a seasonally adjusted annual rate of 646,000. According to the BEA, the advance estimate showed Q2 real GDP increased at a seasonally adjusted annual rate of 2.1% down from the 3.1% growth recorded in the first quarter. The GDP price deflator was up 2.4%.
The week ahead; Trade talks are scheduled to resume this coming week as US trade rep, Lighthizer and Treasury Secretary Mnuchin travel to Shanghai on Tuesday. Discussions have mostly collapsed since May. The Fed is widely expected to lower rates by 25 basis points on Wednesday. Additionally, there is a host of economic data coming out this week including Personal income and spending, Chicago PMI, Manufacturing ISM and the big one; Nonfarm Payrolls on Friday.
The Baker Hughes rig count was flat this week. There are 946 oil and gas rigs operating in the US – down 102 over last year.
Brent Crude Oil gained 1.44% this week closing at $63.37/bbl
WTI Crude Oil gained 0.79% this week to close at $56.20/bbl
Heating Oil gained 0.88% this week closing at $1.91/gallon
Natural Gas lost 4.49% this week closing at $2.15 per million BTUs
Unleaded Gas gained 1.52% this week closing at $1.82/gallon
Metals Complex
Gold lost 0.52% this week closing at $1419.30/oz
Silver gained 1.25% on the week closing at $16.40/oz
Palladium gained 1.51% this week closing at $1531.00/oz
Platinum gained 1.84% this week closing at $867.80/oz
Copper lost 2.45% this week closing at $2.68/lb
Employment Picture
Weekly Unemployment Claims – Released Thursday 7/25 – In the week ending July 20th, initial claims were 206,000, a decrease of 10,000 from the previous week’s unrevised level. The 4-week moving average was 213,000, a decrease of 5,750 from the previous week’s unrevised average.
Job Openings & Labor Turnover Survey JOLTS – Released Tuesday 7/9 – The U.S. Bureau of Labor Statistics reported the number of job openings was little changed at 7.3 million on the last business day of May. Over the month, hires fell to 5.7 million and separations were little changed at 5.5 million. Within separations, the quits rate remained unchanged at a level of 3.4 million. The layoffs and discharges rates were little changed at 1.2%.
June Jobs Report – BLS Summary– Released 7/5 – The US Economyadded 224k nonfarm jobs in June (higher than expected) and the Unemployment rate edged up by 0.1% to 3.7%. The May report was revised down 3k. Average hourly earnings increased by 6 cents. Hiring highlights include Education and Health Services +61k, Professional and Business Services +51k, Transportation and Warehousing +24k.
Average hourly earnings increased by 6 cents/ 0.22% in June, y/y hourly earnings are up 3.1%.
U3 unemployment edged upward slightly by 0.1% to 3.7%. U6 unemployment rate increased 0.1% to 7.2%.
The labor force participation rate was little changed in June at 62.9% (Unchanged year/y).
Average workweek was unchanged at 34.4 hours.
Employment Cost Index – Released 4/30/19 – Compensation costs for civilian workers increased 0.7% for the 3-month period ending in March 2019. The 12 month period ending in March 2019 saw compensation costs increase by 2.8% versus 2.7% in March 2018. Wages and salaries were up 2.9% for the 12-month period ending March 2019, versus 2.7% for the 12-month period ending March 2018. Benefit costs increased 2.6% for the 12-month period ending March 2019. For private industry workers, compensation costs increased 2.8% year-over-year, versus 2.8% for the 12 months ending March 2018. Wages and salaries increased 3.0% year-over-year, versus 2.9% for the 12 months ending March 2018. Benefit costs increased 2.4%, versus 2.5% for the 12 months ending March 2018. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Advance Estimate of 2nd Quarter GDP – Released 7/26 – According to the advance estimate released by the Bureau of Economic Analysis, Real Gross Domestic Product (Real GDP) increased at an annual rate of 2.1% in the second quarter of 2019. The advance estimate is based on data that are either incomplete or subject to more review. The second-quarter increase in real GDP observed positive contributions from personal consumption expenditures (PCE), federal gov’t spending, and state and local gov’t spending that were partly offset by negative contributions from private inventory investment, exports, nonresidential fixed investment, and residential fixed investment. Imports also increased further offsetting gains to real GDP. A second estimate will be released on August 29, 2019.
Durable Goods– Released 7/25 – New orders for manufactured durable goods increased $4.9 billion or 2.0% to $246.0 billion in June.The increase in June follows two consecutive months of decline. Transportation equipment increased 3.1%%, driving the increase by $2.6 billion to $88.8 billion.
New Residential Sales– Released 7/24 – Sales of new single-family homes increased 7.0% to 646k, seasonally adjusted, in June. The median sales price of new homes sold in June was $308k with an average sales price of $310.4k. At the end of June, the seasonally adjusted estimate of new homes for sale was 338k. This represents a supply of 6.3 months at the current sales rate.
Existing Home Sales– Released 7/23 – Existing home sales declined slightly in June. Sales declined 1.7% to a seasonally adjusted rate of 5.27 million. Three of the last four months have seen declines. Sales are currently down 2.2% from one year ago. Housing inventory increased to 4.4 months of inventory and the total housing inventory increased to 1.93 million. The median sales price for all types of homes was $285,700, up 4.3% year/y.
Recent Economic Data
Links take you to the data source
Housing Starts– Released 7/17 – New home starts in June were at a seasonally adjusted rate of 1.253 million; down 0.9% below May and 6.2% above last June’s rate. Building Permits were at a seasonally adjusted rate of 1.220 million, down 6.1% compared to May and down 6.6% over last year.
Industrial Production and Capacity Utilization – Released 7/16 – Industrial production was unchanged in June. For the last two consecutive quarters, industrial production has declined at an annual rate of 1.2%. Total capacity utilization decreased 0.2% to 77.9% in June from an unrevised 78.1% in May.
Retail Sales – Released 7/16 – U.S. retail sales for were up 0.4% month/m to 519.9 billion in June.
Producer Price Index– Released 7/12 – The Producer Price Index for final demand increased 0.1% in June. Core PPI was up 0.1%. Year over year the index for final demand rose 2.1%.
Consumer Price Index –Released 7/11 – The Consumer Price Index increased 0.1% in June. Core CPI, which excludes food and energy increased 0.3%. The monthly changes left total CPI up 1.6% year-over-year and core CPI up 2.1%.
Consumer Credit–Released 7/8 – Consumer credit increased at a seasonally adjusted annual rate of 5.00% in May. Revolving and nonrevolving credit increased 8.25% and 4.00% respectively. Total Outstanding consumer credit is currently at $4.053 trillion.
U.S. Trade Balance–Released 7/3 –The U.S. Trade deficit was $55.5 billion in May, up $4.3 billion from $51.2 billion in April. May exports were $210.6 billion, $4.2 billion more than April exports. May imports were $266.2 billion, $8.5 billion more than April imports. The goods and services deficit has increased $15.7 billion or 6.4% year to date. Year to date exports and imports increased $5.1 billion or 0.5% and $20.8 billion or 1.6% respectively.
PMI Non-Manufacturing Index (ISM Services) – Released 7/3 – Economic activity in the non-manufacturing sector grew in June for the 113th consecutive month. ISM Non-Manufacturing registered 55.1 percent, which is 1.8 percentage points lower than the May reading of 56.9 percent. This represents continued growth in the non-manufacturing sector, at a slightly slower rate.
PMI Manufacturing ISM Index– Released 7/1 – June PMI decreased 0.4% to 51.7% from May’s reading of 52.1%. The New Orders Index was down 2.7% from May’s reading of 52.7% to 50.0% for June. The Production Index registered 54.1% up 2.8%.
U.S. Construction Spending– Released 7/1 – Construction spending declined by 0.8% in May measuring at a seasonally adjusted annual rate of $1,293.9 billion. The May figure is 2.3% below the May 2018 estimate. Private construction spending was 0.7% below the revised April estimate at $953.2 billion. Public construction spending was 0.9% below the revised April estimate at $340.6 billion.
Chicago PMI– Released 6/28–Chicago PMI decreased 4.5 points in June falling to 49.7, down from 54.2 in May. This decline shows the index entering contraction territory and it marks the first time the index has dipped below 50 since January 2017. This decline brings with it reductions in business confidence, weak demand, and slowed production levels. Also, order backlogs are now in contraction for two consecutive months. Factory gate prices have increased with the pressure of trade tariffs. 80% of firms state they feel a negative impact from the tariffs increasing prices and decreasing orders. At this point, it is speculative whether the diminished business confidence is temporary due to the tariffs or signs of more structural issues.
Personal Income– Released 6/28 – Personal Income increased 0.5% in May after seeing a 0.5% increase in April according to the BEA. The majority of the increase in May was due to increases in personal interest income, wages and salaries, and government social benefits to persons. Real PCE (the Feds preferred inflation gauge) increased 0.2% in May. Real disposable personal income increased 0.3% in May.
Consumer Confidence– Released 6/25 – The Consumer confidence index declined in June following an increase in May. The Index now shows a reading of 121.5 down from 131.3 in May. Consumer confidence has reached its lowest level since September 2017 with the decline in consumer confidence in June; following two consecutive months of improvement. The decline in consumer confidence levels suggests consumers were shaken by the escalation in trade and tariff tensions and that they have some uncertainty in the short-term. Further escalations may increase uncertainty among consumers and further increase volatility in the index.
US Light Vehicle Sales – Released 6/7 – U.S. light-vehicle sales were at a seasonally adjusted annual rate (SAAR) of 17.9 million units in May versus a SAAR of 16.9 million units in April.
Next week we get data on Consumer Confidence, Personal Income, Chicago PMI, U.S. Construction Spending, the U.S. Trade Balance, the PMI Manufacturing ISM Index, the July Jobs Report, and the Employment Cost Index.
The S&P rose 1.6% this week and closed at 3025, another new all-time closing high for the index. The Nasdaq, mid-caps and small caps all advanced 2.0% or more. The Dow lagged at just a 0.1% gain – Earnings were in focus all week – Q2 Earnings Scorecard from FactSet; (with 44% of the companies in the S&P 500 reporting actual results), 77% of those companies, reported a positive EPS surprise and 61% of companies have reported a positive revenue surprise. Earnings Growth: For Q2 2019, the blended earnings decline for the S&P 500 is -2.6%. If -2.6% is the actual decline for the quarter, it will mark the first time the index has reported two straight quarters of year-over-year declines in earnings since Q1 2016 and Q2 2016. Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.1. This P/E ratio is above the 5-year average (16.5) and above the 10-year average (14.8).
On the data front; Existing home sales decreased 1.7% month/m in June to a seasonally-adjusted annual rate of 5.27 million. Total sales were 2.2% lower than in the same period a year ago. New Home sales increased 7.0% m/m to a seasonally adjusted annual rate of 646,000. According to the BEA, the advance estimate showed Q2 real GDP increased at a seasonally adjusted annual rate of 2.1% down from the 3.1% growth recorded in the first quarter. The GDP price deflator was up 2.4%.
The week ahead; Trade talks are scheduled to resume this coming week as US trade rep, Lighthizer and Treasury Secretary Mnuchin travel to Shanghai on Tuesday. Discussions have mostly collapsed since May. The Fed is widely expected to lower rates by 25 basis points on Wednesday. Additionally, there is a host of economic data coming out this week including Personal income and spending, Chicago PMI, Manufacturing ISM and the big one; Nonfarm Payrolls on Friday.
Table of Contents
Fixed Income
FOMC March Statement Federal Reserve Dot Plots Dec 18 US Debt Measurement June Meeting Minutes US Corporate Debt Tops $6 Trillion Treasury.gov yields FOMC Policy Normalization Statement
Global Bond Yields
Daily US Treasury Yields
Foreign Exchange Market
Energy Complex
The Baker Hughes rig count was flat this week. There are 946 oil and gas rigs operating in the US – down 102 over last year.
Metals Complex
Employment Picture
Weekly Unemployment Claims – Released Thursday 7/25 – In the week ending July 20th, initial claims were 206,000, a decrease of 10,000 from the previous week’s unrevised level. The 4-week moving average was 213,000, a decrease of 5,750 from the previous week’s unrevised average.
Job Openings & Labor Turnover Survey JOLTS – Released Tuesday 7/9 – The U.S. Bureau of Labor Statistics reported the number of job openings was little changed at 7.3 million on the last business day of May. Over the month, hires fell to 5.7 million and separations were little changed at 5.5 million. Within separations, the quits rate remained unchanged at a level of 3.4 million. The layoffs and discharges rates were little changed at 1.2%.
June Jobs Report – BLS Summary – Released 7/5 – The US Economy added 224k nonfarm jobs in June (higher than expected) and the Unemployment rate edged up by 0.1% to 3.7%. The May report was revised down 3k. Average hourly earnings increased by 6 cents. Hiring highlights include Education and Health Services +61k, Professional and Business Services +51k, Transportation and Warehousing +24k.
Employment Cost Index – Released 4/30/19 – Compensation costs for civilian workers increased 0.7% for the 3-month period ending in March 2019. The 12 month period ending in March 2019 saw compensation costs increase by 2.8% versus 2.7% in March 2018. Wages and salaries were up 2.9% for the 12-month period ending March 2019, versus 2.7% for the 12-month period ending March 2018. Benefit costs increased 2.6% for the 12-month period ending March 2019. For private industry workers, compensation costs increased 2.8% year-over-year, versus 2.8% for the 12 months ending March 2018. Wages and salaries increased 3.0% year-over-year, versus 2.9% for the 12 months ending March 2018. Benefit costs increased 2.4%, versus 2.5% for the 12 months ending March 2018. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Advance Estimate of 2nd Quarter GDP – Released 7/26 – According to the advance estimate released by the Bureau of Economic Analysis, Real Gross Domestic Product (Real GDP) increased at an annual rate of 2.1% in the second quarter of 2019. The advance estimate is based on data that are either incomplete or subject to more review. The second-quarter increase in real GDP observed positive contributions from personal consumption expenditures (PCE), federal gov’t spending, and state and local gov’t spending that were partly offset by negative contributions from private inventory investment, exports, nonresidential fixed investment, and residential fixed investment. Imports also increased further offsetting gains to real GDP. A second estimate will be released on August 29, 2019.
Durable Goods – Released 7/25 – New orders for manufactured durable goods increased $4.9 billion or 2.0% to $246.0 billion in June. The increase in June follows two consecutive months of decline. Transportation equipment increased 3.1%%, driving the increase by $2.6 billion to $88.8 billion.
New Residential Sales – Released 7/24 – Sales of new single-family homes increased 7.0% to 646k, seasonally adjusted, in June. The median sales price of new homes sold in June was $308k with an average sales price of $310.4k. At the end of June, the seasonally adjusted estimate of new homes for sale was 338k. This represents a supply of 6.3 months at the current sales rate.
Existing Home Sales – Released 7/23 – Existing home sales declined slightly in June. Sales declined 1.7% to a seasonally adjusted rate of 5.27 million. Three of the last four months have seen declines. Sales are currently down 2.2% from one year ago. Housing inventory increased to 4.4 months of inventory and the total housing inventory increased to 1.93 million. The median sales price for all types of homes was $285,700, up 4.3% year/y.
Recent Economic Data
Links take you to the data source
Housing Starts – Released 7/17 – New home starts in June were at a seasonally adjusted rate of 1.253 million; down 0.9% below May and 6.2% above last June’s rate. Building Permits were at a seasonally adjusted rate of 1.220 million, down 6.1% compared to May and down 6.6% over last year.
Industrial Production and Capacity Utilization – Released 7/16 – Industrial production was unchanged in June. For the last two consecutive quarters, industrial production has declined at an annual rate of 1.2%. Total capacity utilization decreased 0.2% to 77.9% in June from an unrevised 78.1% in May.
Retail Sales – Released 7/16 – U.S. retail sales for were up 0.4% month/m to 519.9 billion in June.
Producer Price Index – Released 7/12 – The Producer Price Index for final demand increased 0.1% in June. Core PPI was up 0.1%. Year over year the index for final demand rose 2.1%.
Consumer Price Index – Released 7/11 – The Consumer Price Index increased 0.1% in June. Core CPI, which excludes food and energy increased 0.3%. The monthly changes left total CPI up 1.6% year-over-year and core CPI up 2.1%.
Consumer Credit – Released 7/8 – Consumer credit increased at a seasonally adjusted annual rate of 5.00% in May. Revolving and nonrevolving credit increased 8.25% and 4.00% respectively. Total Outstanding consumer credit is currently at $4.053 trillion.
U.S. Trade Balance – Released 7/3 – The U.S. Trade deficit was $55.5 billion in May, up $4.3 billion from $51.2 billion in April. May exports were $210.6 billion, $4.2 billion more than April exports. May imports were $266.2 billion, $8.5 billion more than April imports. The goods and services deficit has increased $15.7 billion or 6.4% year to date. Year to date exports and imports increased $5.1 billion or 0.5% and $20.8 billion or 1.6% respectively.
PMI Non-Manufacturing Index (ISM Services) – Released 7/3 – Economic activity in the non-manufacturing sector grew in June for the 113th consecutive month. ISM Non-Manufacturing registered 55.1 percent, which is 1.8 percentage points lower than the May reading of 56.9 percent. This represents continued growth in the non-manufacturing sector, at a slightly slower rate.
PMI Manufacturing ISM Index – Released 7/1 – June PMI decreased 0.4% to 51.7% from May’s reading of 52.1%. The New Orders Index was down 2.7% from May’s reading of 52.7% to 50.0% for June. The Production Index registered 54.1% up 2.8%.
U.S. Construction Spending – Released 7/1 – Construction spending declined by 0.8% in May measuring at a seasonally adjusted annual rate of $1,293.9 billion. The May figure is 2.3% below the May 2018 estimate. Private construction spending was 0.7% below the revised April estimate at $953.2 billion. Public construction spending was 0.9% below the revised April estimate at $340.6 billion.
Chicago PMI – Released 6/28 – Chicago PMI decreased 4.5 points in June falling to 49.7, down from 54.2 in May. This decline shows the index entering contraction territory and it marks the first time the index has dipped below 50 since January 2017. This decline brings with it reductions in business confidence, weak demand, and slowed production levels. Also, order backlogs are now in contraction for two consecutive months. Factory gate prices have increased with the pressure of trade tariffs. 80% of firms state they feel a negative impact from the tariffs increasing prices and decreasing orders. At this point, it is speculative whether the diminished business confidence is temporary due to the tariffs or signs of more structural issues.
Personal Income – Released 6/28 – Personal Income increased 0.5% in May after seeing a 0.5% increase in April according to the BEA. The majority of the increase in May was due to increases in personal interest income, wages and salaries, and government social benefits to persons. Real PCE (the Feds preferred inflation gauge) increased 0.2% in May. Real disposable personal income increased 0.3% in May.
Consumer Confidence – Released 6/25 – The Consumer confidence index declined in June following an increase in May. The Index now shows a reading of 121.5 down from 131.3 in May. Consumer confidence has reached its lowest level since September 2017 with the decline in consumer confidence in June; following two consecutive months of improvement. The decline in consumer confidence levels suggests consumers were shaken by the escalation in trade and tariff tensions and that they have some uncertainty in the short-term. Further escalations may increase uncertainty among consumers and further increase volatility in the index.
US Light Vehicle Sales – Released 6/7 – U.S. light-vehicle sales were at a seasonally adjusted annual rate (SAAR) of 17.9 million units in May versus a SAAR of 16.9 million units in April.
Next week we get data on Consumer Confidence, Personal Income, Chicago PMI, U.S. Construction Spending, the U.S. Trade Balance, the PMI Manufacturing ISM Index, the July Jobs Report, and the Employment Cost Index.
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
Other Links:
1973 Arab Oil Embargo
Hunt Brothers Silver
Long-Term Capital bailout
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