The S&P 500, Dow Jones and Nasdaq hit new all-time highs on Monday but ultimately closed lower on the week. Energy was the worst-performing sector, down 2.61%. The entire energy complex collapsed this week, with commodity prices only stabilizing on Friday after Iran seized a British oil tanker. Consumer staples and Industrials we the only two sectors not to close lower this week. Gold closed at its highest weekly level since May of 2013 closing at $1,426 per ounce. The Leading Economic Index (LEI) declined 0.3 in June. New home starts were down 6% year/y. Retail sales for June increased 0.4%.
Ahead this week we get a host of big earring reports: United Technologies, Halliburton, Whirlpool, Ford, Caterpillar, Lockheed Martin, Visa, AT&T, Comcast, Amazon, Alphabet, Facebook, Intel, Texas Instruments, Bristol-Myers
Coca-Cola and Starbucks just to name a few of the most-watched. There should also be a new leader in the U.K. – Maybe its Boris, maybe it’s not. Back home Robert Mueller is scheduled to testify before Congress on Wednesday.
Food For Thought:
July 24th will mark two months of a yield inversion. The 10-year yield, minus the Fed Funds rate went negative May 24th.
Global Bond Yields
Foreign Exchange Market
The Baker Hughes rig count was flat this week. There are 958 oil and gas rigs operating in the US – Down 96 over last year.
- Brent Crude Oil fell 6.37% this week closing at $62.47/bbl
- WTI Crude Oil dropped 7.39% this week to close at $55.76/bbl
- Heating Oil fell 4.21% this week closing at $1.897/gallon
- Natural Gas lost 8.23% this week closing at $2.251 per million BTUs
- Unleaded Gas fell 6.80% this week closing at $1.795/gallon
- Gold gained 1.03% this week closing at $1426.70/oz
- Silver gained 1.57% on the week closing at $15.24/oz
- Palladium lost 1.39% this week closing at $1542.40/oz
- Platinum gained 2.86% this week closing at $834.60/oz
- Copper gained 1.24this week closing at $2.69/lb
Weekly Unemployment Claims – Released Thursday 7/18 – In the week ending July 13th, initial claims were 216,000, an increase of 8,000 from the previous week’s revised level. The 4-week moving average was 218,750, a decrease of 250 from the previous week’s revised 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.
- 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
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.
Recent Economic Data
Links take you to the data source
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.
Third Estimate of 1st Quarter GDP – Released 6/27 – According to the third estimate released by the Bureau of Economic Analysis, Real Gross Domestic Product (Real GDP) increased at an annual rate of 3.1% in the first quarter of 2019. The third estimate is based on more complete source data than was available for the second estimate. The second estimate, estimated real GDP, increased at 3.1% in the 1st quarter. The first-quarter increase in real GDP observed positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, state and local gov’t spending, and nonresidential fixed income. Also, imports decreased in the first quarter further increasing gains to real GDP. Positive contributions were partly offset by a decrease in residential fixed investment.
Durable Goods – Released 6/26 – New orders for manufactured durable goods decreased $3.3 billion or 1.3% to $243.4 billion in May. The decrease in May follows a 2.8% decrease in April. Three of the last four months have seen declines. Transportation equipment declined 4.6%, driving the decrease by $3.9 billion to $80.0 billion.
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.
New Residential Sales – Released 6/25 – Sales of new single-family homes declined 7.8% to 626k, seasonally adjusted, in May. The median sales price of new homes sold in May was $308k with an average sales price of $377.2k. At the end of May, the seasonally adjusted estimate of new homes for sale was 333k. This represents a supply of 6.4 months at the current sales rate.
Existing Home Sales – Released 6/21 – Existing home sales rebounded in May after two months of decline. Sales increased 2.5% to a seasonally adjusted rate of 5.34 million. Sales are currently down 1.1% from one year ago. Housing inventory increased to 4.3 months of inventory and the total housing inventory increased to 1.92 million. The median sales price for all types of homes was $277,700, up 4.8% year/y.
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 Existing Home Sales, New Residential Sales, Durable Goods, and the Advance Estimate of Second Quarter GDP Growth.