US equities were mostly higher this week. Nasdaq was the best performer of the major indices, though both Nasdaq and the S&P 500 broke three-straight weekly declines. Some of the best performers included autos/EVs, payments and fintech, hospitals, and precious metals miners, Big tech mostly outperformed, while semis were in line with the broader market. Underperformers leaned cyclical, including homebuilders, retail, banks, credit cards, parcels and logistics, airlines, steel, oil majors, and E&Ps. Treasuries were mixed with the curve flattening. The dollar index was up 0.7%, now up around 3% over the past month. Gold was up 1.2% for the week. Bitcoin futures were little changed. WTI crude was down 1.8%, capping off a second-straight weekly decline after seven-straight weekly gains.
What happened:
Upside was tabbed to peak Fed optimism, including Chair Powell not offering any view on a higher neutral rate or pushback against 2024 rate cuts. Some cooler economic data also supported the peak Fed narrative. August S&P flash manufacturing PMI was the second-lowest print since January and also noted muted pricing pressures. Analysts said positioning is no longer a headwind in equities and investors are well-positioned for higher yields, which could suggest oversold conditions. 2024 S&P earnings revisions breadth also jumped back in positive territory, while improving freight and supply chain costs were also seen as margin tailwinds. AI optimism helped risk sentiment of risk assets.
However, the backup in yields remains the biggest overhang on stocks. This week saw the 10Y yield hit the highest level since 2007 and 30Y since 2011. This week’s softer data added to some recent growth fears, while there were also some cautious consumer spending takeaways from this week’s retail earnings reports. There was also more sell-side commentary around 2024 earnings consensus estimates remaining too high given factors like a late business cycle, monetary and fiscal policy headwinds, and deflation-driven negative operating leverage risk. The housing market tailwind narrative also took a hit this week as mortgage rates hit a 23-year high and purchase applications hit a 28-year low. Banks were also a drag this week after S&P downgraded several lenders.
In his Jackson Hole speech, Fed Chair Powell said the Fed is prepared to raise rates further if appropriate and intends to hold policy at a restrictive level until it is confident inflation is moving sustainably toward the 2% target. Powell also said persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy. Powell also said the Fed cannot identify with certainty the neutral rate of interest, which removed some risk of a hawkish surprise of talk of a higher neutral rate. The market reaction was fairly muted as Powell mostly repeated previous stances that the Fed would be data-dependent while offering no signals about the short-term policy path. Markets continued to price in the Fed’s higher-for-longer stance this week. Bloomberg noted that swaps priced in 150 bp of cuts through year-end 2024 as of a few weeks ago, though that shrunk this past week to 100 bp.
This past week’s retail earnings offered some cautious consumer takeaways. Analysts said results reflected a slowdown into back-to-school and holiday seasons and spending shifts toward value and private label suggested increasing consumer judiciousness.
Week ahead:
This week brings a busy macro calendar, including August Consumer Confidence and July JOLTS report on Tuesday, July pending home sales on Wednesday, July PCE on Thursday, and August ISM manufacturing and August payrolls on Friday. Headline payroll growth is expected to fall again from 187K in July to 172.5K in August, which would be the lowest print since the 268K contraction in Dec-20.
S&P 500 Sector Performance:
Outperformers: Tech +2.57%, Consumer Disc. +1.13%, Communication Services +0.98%
Underperformers: Energy (1.37%), Consumer Spls. (0.76%), Healthcare (0.14%), Materials (0.04%), Financials +0.05%, Utilities +0.27%, Industrials +0.28%, Real Estate +0.71%
The Baker Hughes rig count was down 10 this week. There are 632 oil and gas rigs operating in the US – Down 133 from last year.
Metals Complex
Employment Picture
Weekly Unemployment Claims – Released Thursday 8/24/2023 – In the week ending August 19, the advance figure for seasonally adjusted initial claims was 230,000 decreasing 10,000 from the previous week’s revised level. The 4-week moving average was 236,750 an increase of 2,250 from the previous week’s revised average.
July Jobs Report – BLS Summary – Released 8/4/2023 – The US Economyadded 187k nonfarm jobs in July and the Unemployment rate was little changed at 3.5%. Average hourly earnings increased 14 cents to $33.74. Hiring highlights include +100k Education and Health Services.
Average hourly earnings increased 14 cents/0.4% to $33.74.
U3 unemployment rate was little changed at 3.5%. U6 unemployment rate decreased 0.2% to 6.7%.
The labor force participation rate was unchanged at 62.6%.
Average work week decreased 0.1 hours to 34.3 hours.
Job Openings & Labor Turnover Survey JOLTS – Released 8/1/2023 – The number of job openings decreased to 9.6 million on the last business day of June, the U.S. Bureau of Labor Statistics reported. Over the month the number of hires and total separations decreased to 5.9 million and 5.6 million, respectively. Within separations, quits (3.8 million) increased and discharges (1.5 million) changed little.
Employment Cost Index– Released 7/28/2023 –Compensation costs for civilian workers increased 1.0% for the 3-month period ending in June 2023. The 12-month period ending in June 2023 saw compensation costs increase by 4.5. The 12-month period ending June 2022 increased 5.1%. Wages and salaries increased 4.6 percent over the 12-month June 2023 and increased 5.3 percent for the 12-month period ending in June 2022. Benefit costs increased 4.2 percent over the 12-month period ending June 2023 and increased 4.8 percent for the 12-month period ending in June 2022. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Durable Goods – Released 8/24/2023 – New orders for manufactured durable goods in July, down following four consecutive months of increases, decreased $15.5 billion or 5.2 percent to $285.9 billion, the U.S. Census Bureau announced today. This followed a 4.4 percent June increase. Excluding transportation, new orders increased 0.5 percent. Excluding defense, new orders decreased 5.4 percent. Transportation equipment, also down following four consecutive months of increases, drove the decrease, $16.4 billion or 14.3 percent to $98.7 billion.
New Residential Sales – Released 8/23/2023 – Sales of new single‐family houses in July 2023 were at a seasonally adjusted annual rate of 714,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.4 percent above the revised June rate of 684,000 and is 31.5 percent above the July 2022 estimate of 543,000. The median sales price of new houses sold in July 2023 was $436,700. The average sales price was $513,000. At the end of July, the seasonally adjusted estimate of new homes for sale was 437,000, a supply of 7.3 months at the current sales rate.
Existing Home Sales – Released 8/22/2023 – July 2023 brought 4.07 million in sales, a decrease of 2.2% from June. The median sales price was $406,700. The current unsold housing inventory was 3.3 months of inventory.
Recent Economic Data
Links take you to the data source
Housing Starts – Released 8/16/2023 –July housing starts came in at 1,452,000, 3.9% above the June estimate and 5.9% above the July 2022 rate. Building permits were 0.1% above the June rate at $1,441,000 and 13.0% below the July 2022 rate.
Industrial Production and Capacity Utilization – Released 8/16/2023 –Industrial production increased 1.0% in July following two months of decline. Utilities output increased 5.4%. Manufacturing increased 0.5%. Mining increased 0.5%. Capacity utilization increased to 79.3% in July, 0.4% below the long-run average.
Retail Sales – Released 8/15/2023 –Headline retail sales increased 0.7% in July and are up 3.2% above July 2022.
Producer Price Index – Released 8/11/2023 – The Producer Price Index for final demand increased 0.3 percent in July, seasonally adjusted. Final demand was unchanged in June and decreased 0.3 in May. On an unadjusted basis, the index for final demand moved up 0.8 percent for the 12 months ended in July.
Consumer Price Index– Released 8/10/2023 – The Consumer Price Index for All Urban Consumers rose 0.2 percent in July on a seasonally adjusted basis, after increasing 0.2 percent in June. Over the last 12 months, the all-items index increased 3.2 percent before seasonal adjustment.
U.S. Trade Balance– Released 8/8/2023 – The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $65.5 billion in June, down $2.8 billion from $68.3 billion in May. June exports were $247.5 billion, $0.3 billion less than May exports. June imports were $313.0 billion, $3.1 billion less than May imports. The June decrease in the goods and services deficit reflected a decrease in the goods deficit of $2.8 billion to $88.2 billion and a decrease in the services surplus of less than $0.1 billion to $22.7 billion.
Consumer Credit– Released 8/7/2023 – Consumer credit increased at a seasonally adjusted annual rate of 4 percent in the second quarter. Revolving credit increased at an annual rate of 7.1 percent, while nonrevolving credit increased at an annual rate of 3.0 percent. Consumer credit increased at a seasonally adjusted annual rate of 4.3 percent in June.
PMI Non-Manufacturing Index – Released 8/3/2023 – Economic activity in the services sector expanded in July for the seventh consecutive month as the Services PMI® registered 52.7 percent, 1.2 percentage points lower than June’s reading of 53.9 percent.
U.S. Construction Spending – Released 8/1/2023 – Construction spending during June 2023 was estimated at a seasonally adjusted annual rate of $1,938.4 billion, 0.5 percent above the revised May estimate of $1,929.6 billion. The June figure is 3.5 percent above the June 2022 estimate of $1,873.2 billion.
PMI Manufacturing Index– Released 8/1/2023 – The July Manufacturing PMI registered 46.4 percent, 0.4 percentage points higher than the 46.0 percent recorded in June. Regarding the overall economy, this figure indicates an eighth month of contraction after a 30-month period of expansion. The New Orders Index remained in contraction territory at 47.3 percent, 1.7 percentage points higher than the figure of 45.6 percent recorded in June. The Production Index reading of 48.3 percent is a 1.6-percentage point increase compared to June’s figure of 46.7 percent.
Chicago PMI– Released 7/31/2023 – Chicago PMI remained in contraction territory in July increasing to 42.8 points up from 41.5 points in June. This marks eleven months in contractionary territory.
US Light Vehicle Sales – Released 7/28/2023 –U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 15.657 million units in June.
Personal Income– Released 7/28/2023 –Personal income increased $69.5 billion (0.3 percent at a monthly rate) in June. Disposable personal income (DPI) increased $67.5 billion (0.3 percent). Personal consumption expenditures (PCE) increased $100.4 billion (0.5 percent).
Advance Estimate of 2nd Quarter 2023 GDP – Released 7/27/2023 – Real gross domestic product (GDP) increased at an annual rate of 2.4 percent in the second quarter of 2023, according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0 percent. The GDP estimate released today is based on source data that are incomplete or subject to further revision. The increase in real GDP reflected increases in consumer spending, nonresidential fixed investment, state and local government spending, private inventory investment, and federal government spending that were partly offset by decreases in exports and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.
Consumer Confidence– Released 7/25/2023 – Consumer Confidence increased in July to 117.0, up from 110.1 in June. Consumer confidence improved in July to its highest level since July 2021, reflecting improved current conditions and an improvement in expectations.
Next week we get data on Consumer Confidence, the 2nd Estimate of 2nd Quarter GDP, Personal Income, Chicago PMI, PMI Manufacturing, U.S. Construction Spending, JOLTS, and the August Jobs Report.
Table of Contents
Good Life Advisors – Talking Points – Week 34
US equities were mostly higher this week. Nasdaq was the best performer of the major indices, though both Nasdaq and the S&P 500 broke three-straight weekly declines. Some of the best performers included autos/EVs, payments and fintech, hospitals, and precious metals miners, Big tech mostly outperformed, while semis were in line with the broader market. Underperformers leaned cyclical, including homebuilders, retail, banks, credit cards, parcels and logistics, airlines, steel, oil majors, and E&Ps. Treasuries were mixed with the curve flattening. The dollar index was up 0.7%, now up around 3% over the past month. Gold was up 1.2% for the week. Bitcoin futures were little changed. WTI crude was down 1.8%, capping off a second-straight weekly decline after seven-straight weekly gains.
What happened:
Upside was tabbed to peak Fed optimism, including Chair Powell not offering any view on a higher neutral rate or pushback against 2024 rate cuts. Some cooler economic data also supported the peak Fed narrative. August S&P flash manufacturing PMI was the second-lowest print since January and also noted muted pricing pressures. Analysts said positioning is no longer a headwind in equities and investors are well-positioned for higher yields, which could suggest oversold conditions. 2024 S&P earnings revisions breadth also jumped back in positive territory, while improving freight and supply chain costs were also seen as margin tailwinds. AI optimism helped risk sentiment of risk assets.
However, the backup in yields remains the biggest overhang on stocks. This week saw the 10Y yield hit the highest level since 2007 and 30Y since 2011. This week’s softer data added to some recent growth fears, while there were also some cautious consumer spending takeaways from this week’s retail earnings reports. There was also more sell-side commentary around 2024 earnings consensus estimates remaining too high given factors like a late business cycle, monetary and fiscal policy headwinds, and deflation-driven negative operating leverage risk. The housing market tailwind narrative also took a hit this week as mortgage rates hit a 23-year high and purchase applications hit a 28-year low. Banks were also a drag this week after S&P downgraded several lenders.
In his Jackson Hole speech, Fed Chair Powell said the Fed is prepared to raise rates further if appropriate and intends to hold policy at a restrictive level until it is confident inflation is moving sustainably toward the 2% target. Powell also said persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy. Powell also said the Fed cannot identify with certainty the neutral rate of interest, which removed some risk of a hawkish surprise of talk of a higher neutral rate. The market reaction was fairly muted as Powell mostly repeated previous stances that the Fed would be data-dependent while offering no signals about the short-term policy path. Markets continued to price in the Fed’s higher-for-longer stance this week. Bloomberg noted that swaps priced in 150 bp of cuts through year-end 2024 as of a few weeks ago, though that shrunk this past week to 100 bp.
This past week’s retail earnings offered some cautious consumer takeaways. Analysts said results reflected a slowdown into back-to-school and holiday seasons and spending shifts toward value and private label suggested increasing consumer judiciousness.
Week ahead:
This week brings a busy macro calendar, including August Consumer Confidence and July JOLTS report on Tuesday, July pending home sales on Wednesday, July PCE on Thursday, and August ISM manufacturing and August payrolls on Friday. Headline payroll growth is expected to fall again from 187K in July to 172.5K in August, which would be the lowest print since the 268K contraction in Dec-20.
S&P 500 Sector Performance:
Outperformers: Tech +2.57%, Consumer Disc. +1.13%, Communication Services +0.98%
Underperformers: Energy (1.37%), Consumer Spls. (0.76%), Healthcare (0.14%), Materials (0.04%), Financials +0.05%, Utilities +0.27%, Industrials +0.28%, Real Estate +0.71%
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 10 this week. There are 632 oil and gas rigs operating in the US – Down 133 from last year.
Metals Complex
Employment Picture
Weekly Unemployment Claims – Released Thursday 8/24/2023 – In the week ending August 19, the advance figure for seasonally adjusted initial claims was 230,000 decreasing 10,000 from the previous week’s revised level. The 4-week moving average was 236,750 an increase of 2,250 from the previous week’s revised average.
July Jobs Report – BLS Summary – Released 8/4/2023 – The US Economy added 187k nonfarm jobs in July and the Unemployment rate was little changed at 3.5%. Average hourly earnings increased 14 cents to $33.74. Hiring highlights include +100k Education and Health Services.
Job Openings & Labor Turnover Survey JOLTS – Released 8/1/2023 – The number of job openings decreased to 9.6 million on the last business day of June, the U.S. Bureau of Labor Statistics reported. Over the month the number of hires and total separations decreased to 5.9 million and 5.6 million, respectively. Within separations, quits (3.8 million) increased and discharges (1.5 million) changed little.
Employment Cost Index – Released 7/28/2023 – Compensation costs for civilian workers increased 1.0% for the 3-month period ending in June 2023. The 12-month period ending in June 2023 saw compensation costs increase by 4.5. The 12-month period ending June 2022 increased 5.1%. Wages and salaries increased 4.6 percent over the 12-month June 2023 and increased 5.3 percent for the 12-month period ending in June 2022. Benefit costs increased 4.2 percent over the 12-month period ending June 2023 and increased 4.8 percent for the 12-month period ending in June 2022. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Durable Goods – Released 8/24/2023 – New orders for manufactured durable goods in July, down following four consecutive months of increases, decreased $15.5 billion or 5.2 percent to $285.9 billion, the U.S. Census Bureau announced today. This followed a 4.4 percent June increase. Excluding transportation, new orders increased 0.5 percent. Excluding defense, new orders decreased 5.4 percent. Transportation equipment, also down following four consecutive months of increases, drove the decrease, $16.4 billion or 14.3 percent to $98.7 billion.
New Residential Sales – Released 8/23/2023 – Sales of new single‐family houses in July 2023 were at a seasonally adjusted annual rate of 714,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.4 percent above the revised June rate of 684,000 and is 31.5 percent above the July 2022 estimate of 543,000. The median sales price of new houses sold in July 2023 was $436,700. The average sales price was $513,000. At the end of July, the seasonally adjusted estimate of new homes for sale was 437,000, a supply of 7.3 months at the current sales rate.
Existing Home Sales – Released 8/22/2023 – July 2023 brought 4.07 million in sales, a decrease of 2.2% from June. The median sales price was $406,700. The current unsold housing inventory was 3.3 months of inventory.
Recent Economic Data
Links take you to the data source
Housing Starts – Released 8/16/2023 – July housing starts came in at 1,452,000, 3.9% above the June estimate and 5.9% above the July 2022 rate. Building permits were 0.1% above the June rate at $1,441,000 and 13.0% below the July 2022 rate.
Industrial Production and Capacity Utilization – Released 8/16/2023 – Industrial production increased 1.0% in July following two months of decline. Utilities output increased 5.4%. Manufacturing increased 0.5%. Mining increased 0.5%. Capacity utilization increased to 79.3% in July, 0.4% below the long-run average.
Retail Sales – Released 8/15/2023 – Headline retail sales increased 0.7% in July and are up 3.2% above July 2022.
Producer Price Index – Released 8/11/2023 – The Producer Price Index for final demand increased 0.3 percent in July, seasonally adjusted. Final demand was unchanged in June and decreased 0.3 in May. On an unadjusted basis, the index for final demand moved up 0.8 percent for the 12 months ended in July.
Consumer Price Index – Released 8/10/2023 – The Consumer Price Index for All Urban Consumers rose 0.2 percent in July on a seasonally adjusted basis, after increasing 0.2 percent in June. Over the last 12 months, the all-items index increased 3.2 percent before seasonal adjustment.
U.S. Trade Balance – Released 8/8/2023 – The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $65.5 billion in June, down $2.8 billion from $68.3 billion in May. June exports were $247.5 billion, $0.3 billion less than May exports. June imports were $313.0 billion, $3.1 billion less than May imports. The June decrease in the goods and services deficit reflected a decrease in the goods deficit of $2.8 billion to $88.2 billion and a decrease in the services surplus of less than $0.1 billion to $22.7 billion.
Consumer Credit – Released 8/7/2023 – Consumer credit increased at a seasonally adjusted annual rate of 4 percent in the second quarter. Revolving credit increased at an annual rate of 7.1 percent, while nonrevolving credit increased at an annual rate of 3.0 percent. Consumer credit increased at a seasonally adjusted annual rate of 4.3 percent in June.
PMI Non-Manufacturing Index – Released 8/3/2023 – Economic activity in the services sector expanded in July for the seventh consecutive month as the Services PMI® registered 52.7 percent, 1.2 percentage points lower than June’s reading of 53.9 percent.
U.S. Construction Spending – Released 8/1/2023 – Construction spending during June 2023 was estimated at a seasonally adjusted annual rate of $1,938.4 billion, 0.5 percent above the revised May estimate of $1,929.6 billion. The June figure is 3.5 percent above the June 2022 estimate of $1,873.2 billion.
PMI Manufacturing Index – Released 8/1/2023 – The July Manufacturing PMI registered 46.4 percent, 0.4 percentage points higher than the 46.0 percent recorded in June. Regarding the overall economy, this figure indicates an eighth month of contraction after a 30-month period of expansion. The New Orders Index remained in contraction territory at 47.3 percent, 1.7 percentage points higher than the figure of 45.6 percent recorded in June. The Production Index reading of 48.3 percent is a 1.6-percentage point increase compared to June’s figure of 46.7 percent.
Chicago PMI – Released 7/31/2023 – Chicago PMI remained in contraction territory in July increasing to 42.8 points up from 41.5 points in June. This marks eleven months in contractionary territory.
US Light Vehicle Sales – Released 7/28/2023 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 15.657 million units in June.
Personal Income – Released 7/28/2023 – Personal income increased $69.5 billion (0.3 percent at a monthly rate) in June. Disposable personal income (DPI) increased $67.5 billion (0.3 percent). Personal consumption expenditures (PCE) increased $100.4 billion (0.5 percent).
Advance Estimate of 2nd Quarter 2023 GDP – Released 7/27/2023 – Real gross domestic product (GDP) increased at an annual rate of 2.4 percent in the second quarter of 2023, according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0 percent. The GDP estimate released today is based on source data that are incomplete or subject to further revision. The increase in real GDP reflected increases in consumer spending, nonresidential fixed investment, state and local government spending, private inventory investment, and federal government spending that were partly offset by decreases in exports and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.
Consumer Confidence – Released 7/25/2023 – Consumer Confidence increased in July to 117.0, up from 110.1 in June. Consumer confidence improved in July to its highest level since July 2021, reflecting improved current conditions and an improvement in expectations.
Next week we get data on Consumer Confidence, the 2nd Estimate of 2nd Quarter GDP, Personal Income, Chicago PMI, PMI Manufacturing, U.S. Construction Spending, JOLTS, and the August Jobs Report.
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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