August marked the seventh straight month of gains for the S&P 500, and Friday’s close was the 53-record year-to-date high.
The market continues to climb the wall of worries and there are certainly enough to go around. The biggest concerns have revolved around the spread of the Delta variant and its impact on economic normalization. The Delta variant spread has put some scrutiny on dampened vaccine efficacy, while there has also been a lot of confusion around booster shots. The market has not seemed particularly concerned about a potentially slightly earlier start to Fed tapering or an increasingly complicated path to additional fiscal stimulus. In addition, it has continued to shake off a constant barrage of headlines surrounding more persistent global supply chain constraints and input price pressures, as well as a looming fiscal cliff. The path of least resistance for stocks has been higher on the back of the there-is-no-alternative and buy-the-dip mantras, which have been underpinned by easy financial conditions, outsized policy support, strong corporate earnings, buybacks, and a heightened retail impulse.
The S&P, Nasdaq and Russell all finished higher this week while the Dow ended moderately lower. Defensive leaning sectors put in the best performance with REITs a standout. Consumer staples also fared well with staples retailers, tobacco and drug stores seeing good gains. Healthcare rallied on broad-based strength, including in med-tech, managed care, and biotech. Consumer discretionary outperformed but there was broad-based weakness in retail and apparel and accessories, along with a pullback in homebuilders and autos. Tech beat the tape with upside leadership from hardware names while credit card names were hit by interchange and competition concerns. Communications services finished higher with help from media and telecom while megacap Internet was mixed. Materials ended lower with weakness in the bulk of the industrial metals names, particularly steel. Industrials lagged with weakness in building materials and airlines. Energy underperformed with the heightened skepticism surrounding the reopening trade. Financials put in the worst performance as banks came under pressure with Wells Fargo declining on a report it could face additional regulatory actions. Treasuries put in a mixed performance with some curve steepening. 10-year yields were up just over 2bp to 1.32%. The dollar index was down 0.6%. Gold and WTI crude both gained 0.8%.
The Baker Hughes rig count decreased by 11 this week. There are 497 oil and gas rigs operating in the US – Up 241 over last year.
Metals Complex
Employment Picture
August Jobs Report – BLS Summary – Released 9/3/2021 – The US Economyadded 235k nonfarm jobs in August and the Unemployment rate declined 0.2% to 5.2. Average hourly earnings increased by 17 cents to $30.73. Hiring highlights include+74k Professional and Business Services, +53 Transportation and Warehousing, +37k Manufacturing, and +35 Education and Health Services.
Average hourly earnings increased by 17 cents to $30.73.
U3 unemployment rate declined 0.2% to 5.2%. U6 unemployment rate declined to 8.8%.
The labor force participation rate was unchanged at 61.7%.
Average work week was unchanged at 34.7 hours.
Weekly Unemployment Claims – Released Thursday 9/2/2021 – Initial jobless claims for the week ending August 28th decreased 14k to 340k. The 4-week moving average was 355k, a decrease of 11.75k.
Job Openings & Labor Turnover Survey JOLTS – Released 8/9/2021 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings increased to 10.2 million on the last business day of June. Over the month, hires increased to 6.7 million and separations increased to 5.6 million. Within separations, the quits rate increased to 2.7%. The layoffs and discharges rates were unchanged at 0.9%.
Employment Cost Index – Released 7/30/2021 – Compensation costs for civilian workers increased 0.7% for the 3-month period ending in June 2021. The 12-month period ending in June 2021 saw compensation costs increase by 2.9%. The 12-month period ending June 2020 increased 2.7%. Wages and salaries increased 3.2 percent over the year and increased 2.9 percent for the 12-month period ending in June 2020. Benefit costs increased 2.2 percent over the year and increased 2.2 percent for the 12-month period ending in June 2020. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
PMI Non-Manufacturing Index – Released 9/3/2021 – Economic activity in the non-manufacturing sector grew in August for the 15th consecutive month. ISM Non-Manufacturing registered 61.7 percent, which is 2.4 percentage points below the adjusted July reading of 64.1 percent.
U.S. Trade Balance – Released 9/2/2021 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit decreased in July by $3.2 billion to $70.1 billion. July exports were $212.8 billion, $2.8 billion more than June exports. July imports were $282.9 billion, $0.4 billion less than June imports. Year to date the goods and services deficit increased $131.0 billion or 37.1%, from the same period in 2020. Year to date exports and imports increased $205.0 billion or 16.8% and increased $336.0 billion or 21.3% respectively.
PMI Manufacturing Index – Released 9/1/2021 – August PMI increased 0.4% to 59.9% up from July’s reading of 59.5%. The New Orders Index was up 1.8% from July’s reading of 64.9% to 66.7%. The Production Index registered 60.0%, up 1.6%.
U.S. Construction Spending – Released 9/1/2021 – Construction spending increased 0.3% in July measuring at a seasonally adjusted annual rate of $1,568.8 billion. The July figure is 9.0% above the June 2020 estimate. Private construction spending was 0.3% above the revised June estimate at $1,227.8 billion. Public construction spending was 0.7% above the revised June estimate at $337.8 billion.
Chicago PMI – Released 8/31/2021 – Chicago PMI decreased to 66.8 points in August. Among the five main indicators, Order Backlogs saw the largest increase. That was followed by Supplier Deliveries, while Production saw the largest decline.
Consumer Confidence – Released 8/31/2021 – The Consumer confidence index declined in August. The Index now stands at 113.8, down from 125.1 in July.
Recent Economic Data
Links take you to the data source
Personal Income – Released 8/27/2021 – Personal income increased $225.9 billion or 1.1 percent in July according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $198.0 billion or 1.1 percent and personal consumption expenditures (PCE) increased $42.2 billion or 0.3 percent.
Second Estimate of 2nd Quarter 2021 GDP – Released 8/26/2021 – Real gross domestic product (GDP) increased at an annual rate of 6.6 percent in the second quarter of 2021, according to the second estimate released by the Bureau of Economic Analysis. The Second GDP estimate 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 6.5 percent. The first quarter observed a 6.3 percent increase in real GDP. The increase in real GDP in the second quarter reflected increases in personal consumption expenditures (PCE), nonresidential fixed investment, exports, and state and local government spending that were partly offset by decreases in private inventory investment, residential fixed investment, and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased. The Second GDP estimate reflects upward revisions to nonresidential fixed investment and exports that were partly offset by downward revisions to private inventory investment, residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, were revised down
Durable Goods – Released 8/25/2021 – New orders for manufactured durable goods in July decreased $0.4 billion or 0.1% to $257.2 billion. Transportation equipment led the decrease declining $1.7 billion or 2.2% to $75.3 billion.
New Residential Sales – Released 8/24/2021 – Sales of new single-family homes increased 1.0% to 708k, seasonally adjusted, in July. The median sales price of new homes sold in July was $390,500 with an average sales price of $446,000. At the end of July, the seasonally adjusted estimate of new homes for sale was 367k. This represents a supply of 6.2 months at the current sales rate.
Existing Home Sales – Released 8/23/2021 – Existing home sales increased in July. Sales increased 2.0% to a seasonally adjusted rate of 5.99 million in July. Sales are currently up 1.5% from one year ago. Housing inventory sits at 1.32 million units. Up 7.3% from June’s inventory. Down 12.0% over last year. Unsold inventory sits at a 2.6-month supply. The median existing home price for all housing types was $359,900.
Housing Starts – Released 8/18/2021 – New home starts in July were at a seasonally adjusted annual rate of 1.534 million; down 7.0% below June, but 2.5% above last July’s rate. Building Permits were at a seasonally adjusted annual rate of 1.635 million, up 2.6% compared to June, and up 6.0% over last year.
Retail Sales – Released 8/17/2021 – U.S. retail sales for July decreased 1.1% to $617.7 billion but retail sales are 15.8% above July 2020. U.S. retail sales are up 20.6% year/y.
Industrial Production and Capacity Utilization – Released 8/17/2021 – In July Industrial production increased 0.9%. Manufacturing increased 1.4%. Mining increased 1.2%. Utilities output declined 2.1%. Motor Vehicles and Parts increased 11.2% contributing nearly half the gain seen in factory output last month. Total industrial production was 6.6% higher in July than a year ago, but still 0.2% below its pre-pandemic level. Total capacity utilization increased 0.7% to 76.1% in July which is 3.5% below its long run average.
Producer Price Index – Released 8/12/2021 – The Producer Price Index for final demand increased 1.0% in July. PPI less food and energy increased 1.0% in July.
Consumer Price Index – Released 8/11/2021 – Consumer prices rose 0.5% m/m in July following a 0.9% gain in June. Core consumer prices increased 0.3% m/m in June following a 0.9% gain in June.
Consumer Credit – Released 8/6/2021 – Consumer credit increased at a seasonally adjusted annual rate of 8.8 percent in the second quarter of 2021. Revolving credit increased at an annual rate of 10.7 percent, while nonrevolving credit increased at an annual rate of 8.3 percent. In June, revolving credit increased at an annual rate of 22.0 percent, while nonrevolving credit increased at an annual rate of 7.2 percent.
US Light Vehicle Sales – Released 8/6/2021 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 14.750 million units in July.
Next week we get data on Consumer Credit, PPI, and JOLTS.
Good Life Advisors – Talking Points – Week 35
More All-Time Highs for the S&P.
August marked the seventh straight month of gains for the S&P 500, and Friday’s close was the 53-record year-to-date high.
The market continues to climb the wall of worries and there are certainly enough to go around. The biggest concerns have revolved around the spread of the Delta variant and its impact on economic normalization. The Delta variant spread has put some scrutiny on dampened vaccine efficacy, while there has also been a lot of confusion around booster shots. The market has not seemed particularly concerned about a potentially slightly earlier start to Fed tapering or an increasingly complicated path to additional fiscal stimulus. In addition, it has continued to shake off a constant barrage of headlines surrounding more persistent global supply chain constraints and input price pressures, as well as a looming fiscal cliff. The path of least resistance for stocks has been higher on the back of the there-is-no-alternative and buy-the-dip mantras, which have been underpinned by easy financial conditions, outsized policy support, strong corporate earnings, buybacks, and a heightened retail impulse.
The S&P, Nasdaq and Russell all finished higher this week while the Dow ended moderately lower. Defensive leaning sectors put in the best performance with REITs a standout. Consumer staples also fared well with staples retailers, tobacco and drug stores seeing good gains. Healthcare rallied on broad-based strength, including in med-tech, managed care, and biotech. Consumer discretionary outperformed but there was broad-based weakness in retail and apparel and accessories, along with a pullback in homebuilders and autos. Tech beat the tape with upside leadership from hardware names while credit card names were hit by interchange and competition concerns. Communications services finished higher with help from media and telecom while megacap Internet was mixed. Materials ended lower with weakness in the bulk of the industrial metals names, particularly steel. Industrials lagged with weakness in building materials and airlines. Energy underperformed with the heightened skepticism surrounding the reopening trade. Financials put in the worst performance as banks came under pressure with Wells Fargo declining on a report it could face additional regulatory actions. Treasuries put in a mixed performance with some curve steepening. 10-year yields were up just over 2bp to 1.32%. The dollar index was down 0.6%. Gold and WTI crude both gained 0.8%.
Table of Contents
Fixed Income
July FOMC Statement FOMC Minutes Credit, Liquidity and Balance Sheet Federal Reserve Dot Plots
US Corporate Debt Tops 7 trillion. Treasury.gov yields FOMC Policy Normalization Statement Longer Run Goals August 2020
Global Bond Yields
Daily US Treasury Yields
Foreign Exchange Market
Energy Complex
The Baker Hughes rig count decreased by 11 this week. There are 497 oil and gas rigs operating in the US – Up 241 over last year.
Metals Complex
Employment Picture
August Jobs Report – BLS Summary – Released 9/3/2021 – The US Economy added 235k nonfarm jobs in August and the Unemployment rate declined 0.2% to 5.2. Average hourly earnings increased by 17 cents to $30.73. Hiring highlights include+74k Professional and Business Services, +53 Transportation and Warehousing, +37k Manufacturing, and +35 Education and Health Services.
Weekly Unemployment Claims – Released Thursday 9/2/2021 – Initial jobless claims for the week ending August 28th decreased 14k to 340k. The 4-week moving average was 355k, a decrease of 11.75k.
Job Openings & Labor Turnover Survey JOLTS – Released 8/9/2021 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings increased to 10.2 million on the last business day of June. Over the month, hires increased to 6.7 million and separations increased to 5.6 million. Within separations, the quits rate increased to 2.7%. The layoffs and discharges rates were unchanged at 0.9%.
Employment Cost Index – Released 7/30/2021 – Compensation costs for civilian workers increased 0.7% for the 3-month period ending in June 2021. The 12-month period ending in June 2021 saw compensation costs increase by 2.9%. The 12-month period ending June 2020 increased 2.7%. Wages and salaries increased 3.2 percent over the year and increased 2.9 percent for the 12-month period ending in June 2020. Benefit costs increased 2.2 percent over the year and increased 2.2 percent for the 12-month period ending in June 2020. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
PMI Non-Manufacturing Index – Released 9/3/2021 – Economic activity in the non-manufacturing sector grew in August for the 15th consecutive month. ISM Non-Manufacturing registered 61.7 percent, which is 2.4 percentage points below the adjusted July reading of 64.1 percent.
U.S. Trade Balance – Released 9/2/2021 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit decreased in July by $3.2 billion to $70.1 billion. July exports were $212.8 billion, $2.8 billion more than June exports. July imports were $282.9 billion, $0.4 billion less than June imports. Year to date the goods and services deficit increased $131.0 billion or 37.1%, from the same period in 2020. Year to date exports and imports increased $205.0 billion or 16.8% and increased $336.0 billion or 21.3% respectively.
PMI Manufacturing Index – Released 9/1/2021 – August PMI increased 0.4% to 59.9% up from July’s reading of 59.5%. The New Orders Index was up 1.8% from July’s reading of 64.9% to 66.7%. The Production Index registered 60.0%, up 1.6%.
U.S. Construction Spending – Released 9/1/2021 – Construction spending increased 0.3% in July measuring at a seasonally adjusted annual rate of $1,568.8 billion. The July figure is 9.0% above the June 2020 estimate. Private construction spending was 0.3% above the revised June estimate at $1,227.8 billion. Public construction spending was 0.7% above the revised June estimate at $337.8 billion.
Chicago PMI – Released 8/31/2021 – Chicago PMI decreased to 66.8 points in August. Among the five main indicators, Order Backlogs saw the largest increase. That was followed by Supplier Deliveries, while Production saw the largest decline.
Consumer Confidence – Released 8/31/2021 – The Consumer confidence index declined in August. The Index now stands at 113.8, down from 125.1 in July.
Recent Economic Data
Links take you to the data source
Personal Income – Released 8/27/2021 – Personal income increased $225.9 billion or 1.1 percent in July according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $198.0 billion or 1.1 percent and personal consumption expenditures (PCE) increased $42.2 billion or 0.3 percent.
Second Estimate of 2nd Quarter 2021 GDP – Released 8/26/2021 – Real gross domestic product (GDP) increased at an annual rate of 6.6 percent in the second quarter of 2021, according to the second estimate released by the Bureau of Economic Analysis. The Second GDP estimate 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 6.5 percent. The first quarter observed a 6.3 percent increase in real GDP. The increase in real GDP in the second quarter reflected increases in personal consumption expenditures (PCE), nonresidential fixed investment, exports, and state and local government spending that were partly offset by decreases in private inventory investment, residential fixed investment, and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased. The Second GDP estimate reflects upward revisions to nonresidential fixed investment and exports that were partly offset by downward revisions to private inventory investment, residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, were revised down
Durable Goods – Released 8/25/2021 – New orders for manufactured durable goods in July decreased $0.4 billion or 0.1% to $257.2 billion. Transportation equipment led the decrease declining $1.7 billion or 2.2% to $75.3 billion.
New Residential Sales – Released 8/24/2021 – Sales of new single-family homes increased 1.0% to 708k, seasonally adjusted, in July. The median sales price of new homes sold in July was $390,500 with an average sales price of $446,000. At the end of July, the seasonally adjusted estimate of new homes for sale was 367k. This represents a supply of 6.2 months at the current sales rate.
Existing Home Sales – Released 8/23/2021 – Existing home sales increased in July. Sales increased 2.0% to a seasonally adjusted rate of 5.99 million in July. Sales are currently up 1.5% from one year ago. Housing inventory sits at 1.32 million units. Up 7.3% from June’s inventory. Down 12.0% over last year. Unsold inventory sits at a 2.6-month supply. The median existing home price for all housing types was $359,900.
Housing Starts – Released 8/18/2021 – New home starts in July were at a seasonally adjusted annual rate of 1.534 million; down 7.0% below June, but 2.5% above last July’s rate. Building Permits were at a seasonally adjusted annual rate of 1.635 million, up 2.6% compared to June, and up 6.0% over last year.
Retail Sales – Released 8/17/2021 – U.S. retail sales for July decreased 1.1% to $617.7 billion but retail sales are 15.8% above July 2020. U.S. retail sales are up 20.6% year/y.
Industrial Production and Capacity Utilization – Released 8/17/2021 – In July Industrial production increased 0.9%. Manufacturing increased 1.4%. Mining increased 1.2%. Utilities output declined 2.1%. Motor Vehicles and Parts increased 11.2% contributing nearly half the gain seen in factory output last month. Total industrial production was 6.6% higher in July than a year ago, but still 0.2% below its pre-pandemic level. Total capacity utilization increased 0.7% to 76.1% in July which is 3.5% below its long run average.
Producer Price Index – Released 8/12/2021 – The Producer Price Index for final demand increased 1.0% in July. PPI less food and energy increased 1.0% in July.
Consumer Price Index – Released 8/11/2021 – Consumer prices rose 0.5% m/m in July following a 0.9% gain in June. Core consumer prices increased 0.3% m/m in June following a 0.9% gain in June.
Consumer Credit – Released 8/6/2021 – Consumer credit increased at a seasonally adjusted annual rate of 8.8 percent in the second quarter of 2021. Revolving credit increased at an annual rate of 10.7 percent, while nonrevolving credit increased at an annual rate of 8.3 percent. In June, revolving credit increased at an annual rate of 22.0 percent, while nonrevolving credit increased at an annual rate of 7.2 percent.
US Light Vehicle Sales – Released 8/6/2021 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 14.750 million units in July.
Next week we get data on Consumer Credit, PPI, and JOLTS.
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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