markets

Summary Of the Markets Today:

• The Dow closed down 209 points or 0.67%,
• Nasdaq closed down 0.15%,
• S&P 500 down 0.45%,
• WTI crude oil settled at $96 down 7.61%,
• USD $107.96 down 0.18%,
• Gold $1733 up 0.06%,
• Bitcoin $19,626 down 3.29% – Session Low 19,058,
• 10-year U.S. Treasury 2.91% down 0.048%

Today’s Economic Releases:

The Consumer Price Index (CPI) in June 2022 rose significantly and was the largest monthly rise since September 2005.

Overall, consumer prices grew at 9.1% over the last 12 months – the highest level since 1981.

You can blame much of the rise of the CPI on energy. You can assume the following:

1. The June Employment picture saw significant growth. Since the Federal Reserve is charged with maintaining jobs growth and controlling inflation – they are free to raise the federal funds rate by 75 basis points at their next meeting later this month;
2. There has been a moderation in energy prices recently. It is likely that this 9.1% inflation rate will be the largest this year (all things being equal).
3. Real average hourly earnings for all employees decreased by 1.0% in June – inflation was responsible for this decrease.

The Federal Reserve released its Beige Book for July 2022, and states in part:

Economic activity expanded at a modest pace, on balance, since mid-May; however, several Districts reported growing signs of a slowdown in demand, and contacts in five Districts noted concerns over an increased risk of a recession. Most Districts reported that consumer spending moderated as higher food and gas prices diminished households’ discretionary income.

A summary of headlines we are reading today:

• Biden: Inflation Data Does Not Reflect Impact Of Gasoline Price Decline
• ESG Funds Reel As Investors Pile Into Energy And Defense Stocks
• Peloton competitor Tonal cuts 35% of the workforce as it prepares for possible recession, IPO
• PepsiCo raises revenue forecast as it deploys price hikes, smaller sizes to fight rising costs
• California Governor Signs Bill Allowing Victims to Sue Gun-Makers
• ‘Scary times’: Builders are slashing home prices and slowing construction as buyers pull back, survey shows

These and other headlines and news summaries moving the markets today are included below.

Summary Of the Markets Today:

• The Dow closed down 192 points or 0.62%,
• Nasdaq closed down 0.95%,
• S&P 500 down 0.92%,
• WTI crude oil settled at $95.80 down 8.0%,
• USD $108.17 up 0.15%,
• Gold $1723 down 0.46%,
• Bitcoin $19,463 down 2.4%,
• 10-year U.S. Treasury 2.967% flat 0.0%

Today’s Economic Releases:

Summary Of the Markets Today:

• The Dow closed down 164 points or 0.52%,
• Nasdaq closed down 2.26%,
• S&P 500 down 1.15%,
• WTI crude oil settled at 104 down 1.05%,
• USD $108.14 up 1.07%,
• Gold $1731 flat 0.00%,
• Bitcoin $20469 down 1.69% – Session Low 20293,
• 10-year U.S. Treasury 2.998% down 0.103%

Today’s Economic Releases:

The June 2022 Survey of Consumer Expectations which showed an increase in short-term inflation expectations but a decline in medium-term and longer-term inflation expectations. Home price growth expectations declined sharply.

Thinking of the June 2022 BLS Employment report which came in red hot last Friday – there was a big bust between the two surveys that comprise the report. The household survey showed a 353,000 DECLINE in jobs whilst the establishment survey showed a 381,000 GAIN in jobs. This is not the first month this year this “bust” has occurred. It could be that an underlying dynamic change is invalidating the accuracy of the data gathering methodology of one or both of the surveys. The graph below shows the net change monthly for the last 5 months in the household and the establishment surveys.

The federal budget deficit was $514 billion in the first nine months of the fiscal year 2022.

Summary Of the Markets Today:

• The Dow closed down 46 points or 0.15%,
• Nasdaq closed up 0.12%,
• S&P 500 down 0.08%,
• WTI crude oil settled at 105 up 2.46%,
• USD $106.98 down 0.05%,
• Gold $1741 flat 0.00%,
• Bitcoin $21778 up 0.83% – Session Low 21215,
• 10-year U.S. Treasury 3.088% up 0.08%
• Baker Hughes Rig Count: U.S. +2 to 752 Canada +9 to 175

Today’s Economic Releases:

A strong jobs report for June 2022 shows gains of 372,000 in non-farm employment and the unemployment rate remains at 3.6%. This likely paves the way for a 3/4% increase in the federal funds rate at the next FOMC meeting as the Fed is charged with controlling inflation and maximizing jobs growth. The biggest employment gains were in health care (56.7K) and restaurants/bars (40.8k).

Wholesale trade for May 2022 were up 20.9% year-over-year whilst inventories were up 24.7%. This is considered a strong report.

In May 2022, consumer credit increased at a seasonally adjusted annual rate of 5.9% according to the Federal Reserve. We have been hearing a lot that the consumer, due to inflation, is turning to their credit cards. However, the Fed’s headlines are not inflation adjusted (nor do they have perspective) – please see chart below where it ratios credit outstanding to consumer spending. In this chart, note that when adjusting for inflation and spending – consumer credit is about average for the 21st century.

Summary Of the Markets Today:

• The Dow closed up 345 points or 1.12%,
• Nasdaq closed up 2.28%,
• S&P 500 closed up 1.49%,
• WTI crude oil settled at 103 up 4.63%,
• USD $107.03 up 0.51%,
• Gold $1741 flat 0.00%,
• Bitcoin $21723 up 7.26% – Session Low 20271,
• 10-year U.S. Treasury 3.006% up 0.095%

Today’s Economic Releases:

NFIB’s monthly jobs report says 1/2 of small businesses have job openings they cannot fill. NFIB Chief Economist Bill Dunkelberg stated:

The labor force participation rate has been slowly rising this year, with more people taking jobs. However, the labor shortage continues to be a difficult problem for small businesses.  A few more good months of increased employment might get total employment back to pre-pandemic levels.

The ADP private payroll employment report scheduled for release today has been discontinued until 31 August 2022. According to their press release:

ADP Research Institute (ADPRI) and the Stanford Digital Economy Lab (the “Lab”) announced they will retool the ADP National Employment Report (NER) methodology to provide a more robust, high-frequency view of the labor market and trajectory of economic growth. In preparation for the changeover to the new report and methodology, ADPRI will pause issuing the current report and has targeted August 31, 2022 to reintroduce the new ADP National Employment Report.

According to US Census, the trade deficit slightly moderated. Both exports and imports grew but exports grew more causing the moderation. Still the trade deficit remains near record levels. Normally, an increase in imports signals economic expansion except that inflation clearly is the reason for growth of imports and exports.

The four-week moving average of weekly unemployment insurance claims insignificantly grew for the week ending 02 July 2022.

U.S.-based employers announced 32,517 cuts in June 2022 – a sizeable increase from the previous month and the same month last year. According to Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc.:

Employers are beginning to respond to financial pressures and slowing demand by cutting costs. While the labor market is still tight, that tightness may begin to ease in the next few month. Many of the sectors increasing layoffs this year are currently dealing with the housing market downturn, as demand for mortgages dries up and financing becomes more difficult and expensive to obtain.

Summary Of the Markets Today:

• The Dow closed up 70 points or 0.23%,
• Nasdaq closed up 0.35%,
• S&P 500 closed up 0.36%,
• WTI crude oil settled at 99 down 0.93%,
• USD $107.03 up 0.51%,
• Gold $1741 up 0.03%,
• Bitcoin $20301 down 0.58% – Session Low 19784,
• 10-year U.S. Treasury 2.926% up 0.115%

Today’s Economic Releases:

The JOB OPENINGS AND LABOR TURNOVER  report shows job openings decreased 6.9 percent in May 2022. Econmatters uses the change in job openings to forecast the direction of the economy – and this report is showing the economy is slowing.

The Federal Reserve released its minutes for the FOMC meeting on June 14/15, 2022. The bottom line is that a rate increase of three-quarters of a percent is on the table for the next meeting – and this should not be good news for the markets (although markets rose today). Note that the rest of the minutes discussed an economy that was improving but it looks now that the economy was slowing.

In discussing potential policy actions at upcoming meetings, participants continued to anticipate that ongoing increases in the target range for the federal funds rate would be appropriate to achieve the Committee’s objectives. In particular, participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting. Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist.

The ISM Services survey declined marginally in June 2022 from 55.9 to 55.3 – any value above 50 represents economic expansion. This indicates that the services portion of the economy has been stable – and services represent 2/3rds of the economy.

A potential recession flag is when the 2-year Treasury has a higher yield than the 10-year – and this inversion has been going on for the last two days. At the very least it can be interpreted that the market sees short-term high inflation.

Summary Of the Markets Today:

• The Dow closed down 129 points or 0.42%,
• Nasdaq closed up 1.75%,
• S&P 500 closed up 0.16%,
• WTI crude oil settled at 100, down 9.81%,
• USD $106.57 up 1.44%,
• Gold $1767 down 1.00%,
• Bitcoin $20483 up 3.38% – Session Low 19320,
• 10-year U.S. Treasury 2.825% down 0.079%

Today’s Economic Releases:

CoreLogic’s May 2022 National Home Price report shows prices increased year over year by 20.2%. Their home price forecast predicts that home prices will increase from May 2022 to May 2023 and on a year-over-year basis by 5.0%. According to CoreLogic, “rising mortgage rates and affordability challenges are expected to cool buyer demand.”

New orders for manufactured goods improved in May 2022 to 13.2% year-over-year growth. Manufacturers’ inventories have also grown to 11.3% year-over-year.

 

Summary Of the Markets Today:

• The Dow closed up 322 points or 1.05%,
• Nasdaq closed up 0.90%,
• S&P 500 closed up 1.06%,
• WTI crude oil settled at 108, up 1.91%,
• USD $105.15 up 0.39%,
• Gold $1805 down 0.06%,
• Bitcoin $19325 up 2.31% – Session Low 18673,
• 10-year U.S. Treasury 2.889% down 0.085%
• Baker Hughes Rig Count: U.S. -3 to 750 Canada +12 to 166

Today’s Economic Releases:

Headlines say construction spending declined insignificantly in May 2022 month-over-month. The year-over-year inflation adjusted (red line on chart below) and current dollar numbers (blue line on chart below) both show this sector is in contraction.

The Institute For Supply Management (ISM) says manufacturing grew in June 2022 but declined relative to the previous month.

Summary Of the Markets Today:

• The Dow closed down 254 points or 0.82%,
• Nasdaq closed down 1.33%,
• S&P 500 closed down 0.88%,
• WTI crude oil settled at 105, down 3.44%,
• USD $105.09 down 0.01%,
• Gold $1807 down 0.20%,
• Bitcoin $18891 down 7.05% – Session Low 18853,
• 10-year U.S. Treasury 3.022% down 0.71%

Today’s Economic Releases:

Blame it on inflation – real disposable personal income and outlays for May 2022 declined month-over-month. However, on a year-over-year basis, real disposable personal income declined but real expenditures insignificantly improved.

The four-week moving average for unemployment insurance claims continues to modestly grow.

More potential concerning economic news, the GDPNow model released today estimates real GDP growth in the second quarter of 2022 at -1.0 percent, down from 0.3 percent on June 27. If this comes to pass – this would be the second quarter in a row with negative growth and a significant recession flag.

Summary Of the Markets Today:

• The Dow closed up 82 points or 0.27%,
• Nasdaq closed down 0.03%,
• S&P 500 closed down 0.07%,
• WTI crude oil settled at 109, down 2.33%,
• USD $105.09 up 0.58%,
• Gold $1819 flat 0.00%,
• Bitcoin $20341 up 0.57% – Session Low 19889,
• 10-year U.S. Treasury 3.097% down 0.11%

Today’s Economic Releases:

Views on the economy among CFOs have worsened for 2022, according to the latest results of The CFO Survey, a collaboration of Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta.

The third estimate of 1Q2022 Real GDP was -1.6% (quarter-over-quarter) – down from the second estimates -1.5%. Still, year-over-year Real GDP growth was 3.5% over 1Q2021 – down from 4Q2021’s 5.5%.