Small and mid-caps outperformed along with energy, industrials, materials and healthcare. Mega-cap tech showed weakness most of the week as Apple gave back all of its August and September gains pressuring most all of the big tech names. Valuation concerns are starting to be more pronounced. It’s possible the spectacular IPO from Snowflake on Wednesday brought more attention to highly stretched valuations and got some market participants recalling the crazy IPOs form the late 90’s tech bubble.

At the FOMC meeting this week, the Fed did as expected, keeping rates near zero. Chairman Powell signaled they will remain near zero through 2023. Federal Reserve Dot Plots

 

Fixed Income

 

9/16 FOMC Statement     Credit, Liquidity and Balance Sheet    Federal Reserve Dot Plots     US Debt Measurement     US Corporate Debt Almost 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 gained 1 this week. There are 255 oil and gas rigs operating in the US – down 613 over last year.

  • Brent Crude Oil gained 9.67% this week closing at $43.68/bbl
  • WTI Crude Oil gained 10.69% this week to close at $41.32/bbl
  • Heating Oil gained 7.39% this week closing at $1.17/gallon
  • Natural Gas lost 9.74% this week closing at $2.05 per million BTUs
  • Unleaded Gas gained 10.48% this week closing at $1.21/gallon

Metals Complex

  • Gold gained 0.73% this week closing at $1962.10/oz
  • Silver gained 1.01% on the week closing at $27.13/oz
  • Palladium gained 2.15% this week closing at $2380.80/oz
  • Platinum lost 0.12% this week closing at $938.50/oz
  • Copper gained 2.52% this week closing at $3.12/lb

 

Employment Picture 

Weekly Unemployment Claims – Released Thursday 9/17/2020 – Initial jobless claims for the week ending September 12th declined by 33k to 860k. The 4-week moving average was 912k, a decrease of 61k.

Job Openings & Labor Turnover Survey JOLTS – Released 9/9/2020 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings increased to 6.6 million on the last business day of July. Over the month, hires decreased to 5.8 million and separations was little changed at 5.0 million.  Within separations, the quits rate increased to 2.1%. The layoffs and discharges rates decreased to 1.2%. 

August Jobs Report  BLS Summary – Released 9/4/2020 – The US Economy gained 1.4 million nonfarm jobs in August and the Unemployment rate declined to 8.4%. Average hourly earnings increased by 11 cents.  Hiring highlights include Leisure and Hospitality +174k, Government +344, Retail Trade +249, Professional and Business Services +197k.

  • Average hourly earnings increased by 11 cents in July to $29.47.
  • U3 unemployment rate declined to 8.4%. U6 unemployment rate declined to 14.2%.
  • The labor force participation rate increased 0.3% to 61.7%.
  • Average work week increased by 0.1 hours to 34.6 hours.

Employment Cost Index – Released 7/31/2020 – Compensation costs for civilian workers increased 0.5% for the 3-month period ending in June 2020. The 12 month period ending on June 2020 saw compensation costs increase by 2.7%, same as the 12 month period ending June 2019. Wages and salaries increased 2.9 percent over the year and increased 2.9 percent for the 12-month period ending in June 2019. Benefit costs increased 2.2 percent for the 12-month period ending in June 2020. In June 2019, the increase was 2.3 percent. This report is published quarterly.

This Week’s Economic Data

Links take you to the data source

Housing Starts – Released 9/17/2020 – New home starts in August were at a seasonally adjusted annual rate of 1.416 million; down 5.1% below July but 2.8% above last August’s rate. Building Permits were at a seasonally adjusted annual rate of 1.470 million, down 0.9% compared to July and down 0.1% over last year.

Retail Sales – Released 9/16/2020 – U.S. retail sales for August increased 0.6% to $537.5 billion. U.S. retail sales are up 2.4% year/y. 

Industrial Production and Capacity Utilization – Released 9/15/2020 – In August Industrial production increased 0.4%. Total Industrial production is still 7.3% below its pre-pandemic February level. Manufacturing increased 1.0%. Mining production declined 2.5% due to severe weather from Tropical Storm Marco and Hurricane Laura. Total industrial production was 101.4% of its 2012 average which is 7.7% lower in August than a year ago.  Total capacity utilization increased 0.3% to 71.4% in August which is 8.4% below its long run average.

 

Recent Economic Data

Links take you to the data source 

Consumer Price Index – Released 9/11/2020 – The Consumer Price Index increased 0.4% in August. Core CPI, which excludes food and energy also increased 0.4%. The monthly changes left total CPI up 1.3% year-over-year and core CPI up 1.7%. 

Producer Price Index – Released 9/10/2020 – The Producer Price Index for final demand increased 0.3% in August. PPI less food and energy also increased 0.3% in August.

Consumer Credit  Released 9/8/2020 – In July, consumer credit decreased at a seasonally adjusted rate of 3.5%. Revolving credit decreased at an annual rate of 0.5 percent, while nonrevolving credit increased at an annual rate of 4.75 percent. Total Outstanding consumer credit is currently at $4.139 trillion.  

US Light Vehicle Sales – Released 9/4/2020 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 15.193 million units in August. 

PMI Non-Manufacturing Index (ISM Services) – Released 9/3/2020 – Economic activity in the non-manufacturing sector grew in August for the third consecutive month. ISM Non-Manufacturing registered 56.9 percent, which is 1.2 percentage points below the adjusted July reading of 58.1 percent. 

U.S. Trade Balance  Released 9/3/2020 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit increased in July by $10.1 billion to $63.6 billion. July exports were $168.1 billion, $12.6 billion more than June exports. July imports were $231.7 billion, $22.7 billion more than June imports. The goods and services deficit increased $6.4 billion or 1.8% year-to-date, from the same period in 2019. Year – over – year exports and imports decreased $257.8 billion or 17.5% and decreased $251.3 billion or 13.8% respectively.   

PMI Manufacturing ISM Index – Released 9/1/2020 – August PMI increased 1.8% to 56.0% from July’s reading of 54.2%. The New Orders Index was up 6.1% from July’s reading of 61.5% to 67.6%. The Production Index registered 63.3%, up 1.2%.

U.S. Construction Spending – Released 9/1/2020 – Construction spending increased 0.1% in July measuring at a seasonally adjusted annual rate of $1,364.6 billion. The July figure is 0.1% below the July 2019 estimate. Private construction spending was 0.6% above the revised June estimate at $1,013.5 billion. Public construction spending was 1.3% below the revised June estimate at $351.1 billion.

Chicago PMI Released 8/31/2020  Chicago PMI decreased 0.7 points declining to 51.2. This marks two consecutive months above the 50-mark following a full year under it. Firms stated that business activity picked up further in August. Among the five main indicators, Order Backlogs was the only category to show a monthly decline, while Supplier Deliveries recorded the largest gain.  

Personal Income – Released 8/28/2020 – Personal income increased $70.5 billion or 0.4 percent in July according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $39.9 billion or 0.2 percent and personal consumption expenditures (PCE) increased $267.6 billion or 1.9 percent. 

Second Estimate of 2nd Quarter 2020 GDP – Released 8/27/2020 – Real gross domestic product (GDP) decreased at an annual rate of 31.7 percent in the second quarter of 2020, according to the second estimate released by the Bureau of Economic Analysis. The decline in GDP seen in the second quarter marks the worst quarterly decline in GDP to date. This GDP estimate is based on data that are more complete than that of the data of the advance estimate. The advance estimate saw GDP declining 32.9 percent in the second quarter. The second estimate, private inventory investment and personal consumption expenditures (PCE) decreased less than previously estimated. The decrease in real GDP reflected decreases in personal consumption expenditures (PCE), exports, private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending that were partly offset by an increase in federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased.

Durable Goods – Released 8/26/2020 – New orders for manufactured durable goods in July increased for the third consecutive month up $23.2 billion or 11.2% to $230.7 billion. Transportation equipment led the increase rising $19.6 billion or 35.6% to $74.7 billion.

Consumer Confidence Released 8/25/2020  The Consumer confidence index decreased 6.90% in August following an decrease in July. The Index now shows a reading of 84.8, down from 91.7 in July. 

New Residential Sales – Released 8/25/2020 – Sales of new single-family homes increased 13.9% to 901k, seasonally adjusted, in July. The median sales price of new homes sold in July was $330,600 with an average sales price of $391,300. At the end of July the seasonally adjusted estimate of new homes for sale was 299k. This represents a supply of 4.0 months at the current sales rate. 

Existing Home Sales – Released 8/21/2020 – Existing home sales increased in July following a strong rebound in June. Sales increased 24.7% to a seasonally adjusted rate of 5.86 million in July. Sales are currently up 8.7% from one year ago. Housing inventory sits at 1.50 million units. Down 2.6% over last month. Down 21.1% over last year. Unsold inventory sits at a 3.1 month supply. The median existing home price for all housing types was $304,100.  

Next week we get data on Existing Home Sales, New Residential Sales, and Durable Goods.

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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