What I’m Watching This Week – 26 September 2022

The Markets (as of market close September 23, 2022)

Investors endured their second harrowing week in a row as the Federal Reserve continued to raise interest rates aggressively to combat inflation. New signs of slowing global growth and Russia’s threats to escalate the war in Ukraine provided more reasons for selloffs in the stock and bond markets by nervous investors. The Nasdaq, the Russell 2000, and the S&P 500 all sunk deeper into bear territory, and the Dow dropped to its lowest level of 2022. In a cruel twist of fate, bonds are not behaving like the port in the storm that investors tend to expect. Treasury prices have fallen and yields have risen to heights not seen in more than a decade. The dollar is exhibiting unusual strength against many foreign currencies, including the pound, the euro and the yen. Oil prices fell to their lowest levels since January.

Stocks pushed higher to end last Monday, rallying from what had been the worst week of performance since June. Each of the benchmark indexes listed here posted moderate to solid gains, led by the Russell 2000 and the Nasdaq, which gained 0.8%. A spike in megacaps helped drive the rebound. The S&P 500 rose 0.7% and the Dow climbed 0.6%. The Global Dow inched 0.3% higher. Traders tried to gauge the impact of what is expected to be another 75-basis point rate hike from the Federal Reserve. Ten-year Treasury yields rose to 3.49%, while two-year Treasury yields, which are more sensitive to near-term interest-rate movements, hit their highest rate since 2007 after climbing to 3.94%. Crude oil prices moved marginally higher, closing at $85.53 per barrel. The dollar edged lower, while gold prices advanced.

Wall Street saw stocks tumble lower last Tuesday, while Treasury yields jumped higher as investors braced for the Federal Reserve’s expected interest-rate boost. The Russell 2000 (-1.4%) fell the furthest among the benchmark indexes listed here, followed by the S&P 500 (-1.1%), the Dow and the Global Dow (-1.0%), and the Nasdaq (-0.9%). Ten-year Treasury yields climbed 8.1 basis points to 3.57%, while the yield on the two-year Note rose to 3.96%. Crude oil prices fell 1.8%, sliding to $84.19 per barrel. The dollar advanced, while gold prices dipped lower.

Last Wednesday, investors reacted to the 75-basis point interest-rate hike by moving away from stocks. Each of the benchmark indexes listed here closed the session in the red, with only the Russell 2000 and the Global Dow falling less than 1.7% (-1.4% and -1.5%, respectively). The Nasdaq dropped 1.8%, while the S&P 500 and the Dow fell 1.7%. Bond prices climbed higher, pulling yields lower. Ten-year Treasury yields decreased 6.1 basis points to end the day at 3.51%. Crude oil prices declined for the second consecutive day, falling to $83.09 per barrel. The dollar rose for the second day in a row, while gold prices advanced, reversing the previous day’s fall.

Wall Street tumbled lower for the third consecutive session last Thursday. Each of the benchmark indexes listed here lost value, with the Russell 2000 falling 2.3% and the Nasdaq dropping 1.4%. The S&P 500 and the Global Dow slid 0.8%, and the Dow slipped 0.4%. Traders continued to react to the Federal Reserve’s aggressive measures to rein in inflation by selling stocks, particularly growth shares, including technology stocks. Ten-year Treasury yields added nearly 20 basis points, reaching 3.70%. Crude oil prices and the dollar inched higher. Gold prices rose $4.00, hitting $1,679.70 per ounce.

On Friday, stock market investors continued their tantrum for a fourth straight day after a report showed that economic activity in Europe declined sharply in September. The Global Dow took the biggest hit, skidding 2.6%, followed closely by the Russell 2000 (-2.5%). The Nasdaq dropped 1.8% and S&P 500 fell 1.7%. The Dow was down 1.6%, ending the day at its lowest level of 2022. Energy stocks took a particularly hard beating, as crude oil plunged 5% to land below $80 per barrel. Gold prices fell and the dollar strengthened. Ten-yield Treasury yields were little changed.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 9/23Weekly ChangeYTD Change
DJIA36,338.3030,822.4229,590.41-4.00%-18.57%
Nasdaq15,644.9711,448.4010,867.93-5.07%-30.53%
S&P 5004,766.183,873.333,693.23-4.65%-22.51%
Russell 20002,245.311,798.191,679.59-6.60%-25.20%
Global Dow4,137.633,450.243,267.25-5.30%-21.04%
Fed. Funds target rate0.00%-0.25%2.25%-2.50%3.00%-3.25%75 bps300 bps
10-year Treasuries1.51%3.44%3.69%25 bps218 bps
US Dollar-DXY95.64109.70113.193.18%18.35%
Crude Oil-CL=F$75.44$85.25$79.43-6.83%5.29%
Gold-GC=F$1,830.30$1,683.70$1,651.70-1.90%-9.76%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • As expected, the Federal Open Market Committee raised the target range for the federal funds rate 75 basis points to 3.00%-3.25%, and anticipates that ongoing increases will be appropriate. This is the highest level for the federal funds rate since 2008. According to Fed Chair Jerome Powell, the Committee is committed to bringing inflation back down to their 2.0% goal. In continuing to push interest rates higher, the FOMC suggested that the economy is resilient, highlighting modest growth in spending and production, although August data showed that inflation continued to rise, albeit at a slower pace. According to Federal Reserve projections, officials see inflation rising to 5.4% this year. The federal funds rate is projected to increase to 4.4% by the end of this year and 4.6% by the close of 2023, which the Fed expects will bring inflation down to 2.8% by the end of next year.
  • The number of housing starts increased by 12.2% in August over July’s total. However, building permits and housing completions slid lower, 10.0% and 5.4%, respectively. Building permits for single-family homes dipped 3.5% last month, while housing completions (0.4%) and housing starts (3.4%) increased.
  • Sales of existing homes slid lower for the seventh consecutive month in August after declining 0.4%. Existing home sales are down 19.9% since August 2021. While mortgage rates have risen, existing home prices have not decreased at the same pace and remain somewhat elevated. Total housing inventory sat at a 3.2-month supply in August, unchanged from July. The median existing-home price for all housing types was $389,500 in August, higher than the August 2021 price of $361,500 but lower than the July price of $399,200. Sales of existing single-family homes also declined in August, down 0.9% from July and 19.2% below the August 2021 pace. The median existing single-family home price in August was $396,300, down from the July price of $405,800. The August decline was the second consecutive monthly decrease in the median sales price for existing single-family homes.
  • The national average retail price for regular gasoline was $3.654 per gallon on September 19, $0.036 per gallon below the prior week’s price but $0.470 higher than a year ago. Also as of September 19, the East Coast price decreased $0.070 to $3.457 per gallon; the Gulf Coast price rose $0.031 to $3.157 per gallon; the Midwest price dropped $0.053 to $3.518 per gallon; the West Coast price increased $0.020 to $4.845 per gallon; and the Rocky Mountain price fell $0.012 to $3.877 per gallon. Residential heating oil prices averaged $3.173 per gallon on September 16, about $0.406 per gallon less than the prior week’s price.
  • For the week ended September 17, there were 213,000 new claims for unemployment insurance, an increase of 5,000 from the previous week’s level, which was revised down by 5,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended September 10 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended September 10 was 1,379,000, a decrease of 22,000 from the previous week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates for the week ended September 3 were New Jersey (2.0%), California (1.7%), New York (1.6%), Puerto Rico (1.6%), Rhode Island (1.4%), Massachusetts (1.3%), Connecticut (1.2%), Nevada (1.2%), Pennsylvania (1.1%), Alaska (1.1%), and Oregon (1.1%). The largest increases in initial claims for the week ended September 10 were in Indiana (+738), Arkansas (+217), Iowa (+149), North Dakota (+28), and Maine (+15), and while the largest decreases were in California (-3,064), New York (-2,905), Texas (-2,493), Oklahoma (-1,729), and Pennsylvania (-1,355).

Eye on the Week Ahead

There are plenty of important economic reports out during the last week of September. The final estimate of gross domestic product is out this week. It is not expected to change much from the prior estimate, which showed the economy retracted by 0.6% in the second quarter. The report on personal income and outlays for August is also available this week. The personal consumption expenditures price index, a key inflation indicator favored by the Federal Reserve, is included in this report.

What I’m Watching This Week – 19 September 2022

The Markets (as of market close September 16, 2022)

Inflation is still rising, albeit at a slower pace, according to the latest data out last week. This will likely support further interest-rate increases from the Federal Reserve and worries of a resulting economic recession. Stocks retreated, culminating in the worst week since June. The Nasdaq suffered through its worst week since January after falling nearly 5.5%. The S&P 500, the Russell 2000, and the Dow lost at least 4.0%. The Global Dow also ended last week well in the red. Crude oil prices declined for a third consecutive week, while gold prices continued to slide, despite a bump higher at the end of the week. The dollar inched higher. Year to date, while all of the benchmark indexes listed here are well below their 2021 closing values, the Nasdaq has fallen nearly 27.0%.

Wall Street rallied last Monday ahead of the latest Consumer Price Index report that investors hope would show that inflation is peaking. The S&P 500 rose for the fourth consecutive session after gaining 1.1%, marking its longest winning streak in two months. The Nasdaq climbed 1.3%, the Russell 2000 added 1.2%, the Dow advanced 0.7%, and the Global Dow jumped 1.4%. The dollar slid lower, while 10-year Treasury yields increased 4.1 basis points to close the day at 3.61%. Crude oil prices rose $1.12 to reach $87.91 per barrel.

Stocks reacted negatively after last Tuesday’s hotter-than-expected CPI report showed that inflation probably hasn’t peaked quite yet. Each of the benchmark indexes listed here ended the trading session in the red, wiping out practically all of the gains attained over the prior four sessions. The Nasdaq dropped 5.2%, followed by the S&P 500 (-4.3%), the Dow and the Russell 2000 (-3.9%), and the Global Dow (-2.9%). Ten-year Treasury yields climbed to 3.42%. The dollar jumped 1.4%, while gold prices slid 1.6%. Crude oil prices dipped to $87.50 per barrel.

Dip buyers seized the opportunity to snatch some undervalued stocks last Wednesday, nudging Wall Street slightly higher following the biggest single-day rout in two years. The Nasdaq gained 0.7%, the Russell 2000 added 0.4%, the S&P 500 rose 0.3%, and the Dow inched up 0.1%. The Global Dow fell 0.2%. Ten-year Treasury yields slipped to 3.41%. The dollar and gold prices fell. Crude oil prices edged up by nearly $1.50, closing at roughly $88.80 per barrel.

Stocks closed lower last Thursday, with each of the benchmark indexes listed here losing value. While stock values declined, bond yields rose. The yield on 10-year Treasuries closed at 3.45%, while the two-year Treasury yield hit 3.87%, the highest rate since October 2007. The Nasdaq dropped 1.4%, the S&P 500 slid 1.1%, the Global Dow fell 0.8%, the Russell 2000 dipped 0.7%, and the Dow lost 0.6%. Crude oil prices fell nearly 3.7%, dropping to $85.18 per barrel. The dollar inched higher, while gold prices declined to $1,673.40 per ounce, the lowest price in over a year.

Equities fell last Friday after a major delivery service company announced weak quarterly results. The Russell 2000 (-1.5%) and the Global Dow (-1.1%) dipped the furthest, followed by the Nasdaq (-0.9%), the S&P 500 (-0.7%), and the Dow (-0.5%). The yield on 10-year Treasuries slipped 1.0 basis point to 3.44%. Crude oil prices rose by $0.15 to $85.25, the dollar was flat, while gold prices jumped $6.40 to $1,683.70 per ounce.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 9/16Weekly ChangeYTD Change
DJIA36,338.3032,151.7130,822.42-4.13%-15.18%
Nasdaq15,644.9712,112.3111,448.40-5.48%-26.82%
S&P 5004,766.184,067.363,873.33-4.77%-18.73%
Russell 20002,245.311,882.851,798.19-4.50%-19.91%
Global Dow4,137.633,564.663,450.24-3.21%-16.61%
Fed. Funds target rate0.00%-0.25%2.25%-2.50%2.25%-2.50%75 bps225 bps
10-year Treasuries1.51%3.32%3.44%12 bps193 bps
US Dollar-DXY95.64108.98109.700.66%14.70%
Crude Oil-CL=F$75.44$86.26$85.25-1.17%13.00%
Gold-GC=F$1,830.30$1,727.10$1,683.70-2.51%-8.01%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • The latest data does not support the Federal Reserve scaling back its aggressive policies aimed at curbing inflation. The Consumer Price Index advanced 0.1% in August after being unchanged in July. Price increases were broad-based in August, with shelter, food, and medical care among the largest contributors. Those increases were mostly offset by a 10.6% decrease in gasoline prices. Other areas that declined last month included airline fares, communication, and used cars and trucks. Core prices, excluding volatile food and energy, rose 0.6% last month, higher than the 0.3% increase in July. For the 12 months ended in August, the CPI advanced 8.3%, down marginally from the 8.5% increase for the year ended in July. Core prices rose 6.1% for the 12 months ended in August, up from the 5.9% increase for the 12 months ended in July.
  • Prices at the producer level fell in August for the second consecutive month. The Producer Price Index (a gauge of prices at the wholesale level) declined 0.1% last month after decreasing 0.4% in July. For the 12 months ended in August, producer prices have risen 8.7%, the lowest annual increase since August 2021. Prices for goods fell 1.2% in August, while prices for services rose 0.4%. Producer prices less food, energy, and trade services moved up 0.2% in August, and have increased 5.6% over the past 12 months. Pulling goods prices lower was a 6.0% drop in energy prices, led by a 12.7% decline in gasoline prices. Goods prices less foods and energy actually rose 0.2% last month.
  • Both import and export prices declined in August. Import prices fell 1.0% last month after retreating 1.5% in July. Import prices advanced 7.8% for the year ended in August, the smallest 12-month increase since the 12-months ended in March 2021. Import fuel prices decreased 6.8% in August for the second consecutive month. Despite the recent declines, import fuel prices rose 48.5% from August 2021 to August 2022. Prices for nonfuel imports declined 0.2 percent in August following a 0.5- percent decrease in July. Lower agricultural and nonagricultural prices each contributed to the August decline in export prices. Nevertheless, export prices advanced 10.8% over the past 12 months.
  • Retail food and services sales for August rose 0.3% from the previous month and 9.1% above August 2021. Retail trade sales were up 0.2% in August and 8.9% over the past 12 months. Businesses that saw an increase in sales last month included motor vehicle and parts dealers; building material and garden equipment and supplies dealers; food and beverage stores; clothing and clothing accessories stores; sporting goods, hobby, musical instrument, and book stores; general merchandise stores; and food services and drinking places. Nonstore (online) retailers saw sales drop in August, as did gasoline stations, health and personal care stores, and furniture and home furnishing stores.
  • Industrial production decreased 0.2% in August. Manufacturing output edged up 0.1% after increasing 0.6% in July. The index for mining was unchanged, while the index for utilities decreased 2.3%. Total industrial production in August was 3.7% above its year-earlier level.
  • The federal government deficit for August was $219.6 billion, $8.5 billion greater than the July deficit. Through 10 months of the fiscal year, the deficits sits at $945.7 billion, 187% under the deficit over the same period in the previous fiscal year. Total government receipts for this fiscal year are $4,408.4 billion compared to $3,586.5 billion over the same period in the last fiscal year. Conversely, total government outlays through the first 10 months of this fiscal year are $942.9 billion less than the government expenditures over the same period in the previous fiscal year.
  • The national average retail price for regular gasoline was $3.690 per gallon on September 12, $0.056 per gallon below the prior week’s price but $0.525 higher than a year ago. Also as of September 12, the East Coast price decreased $0.086 to $3.527 per gallon; the Gulf Coast price fell $0.103 to $3.126 per gallon; the Midwest price dropped $0.067 to $3.571 per gallon; the West Coast price slid $0.084 to $4.825 per gallon; and the Rocky Mountain price fell $0.051 to $3.889 per gallon. Residential heating oil prices averaged $3.579 per gallon on September 9, about $0.001 per gallon more than the prior week’s price. In the first half of 2022, U.S. exports of petroleum products averaged nearly 6.0 million barrels per day, or 11.0%, over the same period last year. According to the latest data from the U.S. Energy Information Administration, the increase in exports of petroleum products is the highest first half of the year exports since 1981.
  • For the week ended September 10, there were 213,000 new claims for unemployment insurance, a decrease of 5,000 from the previous week’s level, which was revised down by 4,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended September 3 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended September 3 was 1,403,000, an increase of 2,000 from the previous week’s level, which was revised down by 72,000. States and territories with the highest insured unemployment rates for the week ended August 27 were New Jersey (2.2%), California (1.8%), Rhode Island (1.8%), New York (1.7%), Puerto Rico (1.7%), Connecticut (1.6%), Massachusetts (1.5%), Pennsylvania (1.3%), Nevada (1.2%), Illinois (1.1%), and Oregon (1.1%).The largest increases in initial claims for the week ended September 3 were in Oklahoma (+1,935), Pennsylvania (+1,069), Kentucky (+824), Ohio (+659), and Indiana (+610), while the largest decreases were in New York (-3,662), Michigan (-2,132), Connecticut (-1,285), Alabama (-314), and Virginia (-310).
  •  

Eye on the Week Ahead

The August data for housing starts and existing home sales is available this week. The residential sector has slowed considerably from its torrid pace in 2021. Also this week, attention is focused on the latest meeting of the Federal Open Market Committee. It is expected that the Committee will hike interest rates by 75 basis points as it attempts to temper rising inflation.

What I’m Watching This Week – 12 September 2022

The Markets (as of market close September 9, 2022)

Are investors accepting the Federal Reserve’s hawkish path to reduce inflation? Last week’s market performance may lend credence to that possibility, as each of the benchmark indexes listed here posted solid gains, reversing three weeks of losses. A jump in tech shares pushed the Nasdaq up to its highest level since late August. The S&P 500 passed its 100-day average, and the Russell 2000 added more than 4.0%. The dollar dipped lower, moving away from a record high. Gold prices increased. Crude oil prices decreased for the second consecutive week. There have been few signs that the aggressive interest-rate hike agenda pushed by the Fed will hinder the economy, possibly easing investor worries.

Stocks edged lower last Tuesday to kick off the holiday-shortened week. The Russell 2000 dropped 1.0%, followed by the Nasdaq (-0.7%), the Dow and the Global Dow (-0.6%), and the S&P 500 (-0.4%). Every market sector except energy moved higher. The yield on 10-year Treasuries jumped 15.0 basis points to 3.34%. Crude oil prices fell nearly $0.50, settling at $86.73 per barrel. The dollar rose, while gold prices fell.

Wall Street enjoyed its best day in a month last Wednesday as stocks rebounded and bond yields tumbled. The Nasdaq surged to its biggest jump in three weeks after gaining 2.1%. The small caps of the Russell 2000 added 2.1%, while the S&P 500 (1.8%) and the Dow (1.4%) notched gains. The Global Dow rose 0.6%. Crude oil prices fell to a new seven-month low after settling at $81.87 per barrel. Ten-year Treasury yields dipped 7.5 basis points to 3.26%. The dollar declined 0.6%, while gold prices jumped nearly $16.00 to $1,728.60 per ounce.

Last Thursday, gains by financial and health-care stocks helped drive Wall Street to its second consecutive positive session. While each of the benchmark indexes listed here gained ground, markets across the globe declined over worries that aggressive policies aimed at curtailing inflation would stall the economy. Indicative of monetary tightening, the European Central Bank hiked interest rates by 75 basis points and indicated further hikes were likely. Domestically, the Russell 2000 and the Global Dow rose 0.8%. The S&P 500 gained 0.7%, while the Dow and the Nasdaq added 0.6%. Ten-year Treasury yields climbed 2.7 basis points, ending the day at 3.29%. Crude oil prices inched higher, the dollar dipped lower, and gold prices fell 0.5% to $1,719.30 per ounce.

Stocks extended last Thursday’s gains into Friday as investors gobbled up perceived bargains after three weeks of declines. Each of the benchmark indexes added value last Friday, led by the Nasdaq (2.1%), followed by the Russell 2000 (1.9%), the Global Dow (1.7%), the S&P 500 (1.5%), and the Dow (1.2%). The market sectors rose higher, led by communication services, consumer discretionary, energy, and information technology. Crude oil prices rose $2.72 to $86.26 per barrel. Gold prices advanced, while the dollar dipped lower. Yields on 10-year Treasuries increased 2.9 basis points, reaching 3.32%.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 9/9Weekly ChangeYTD Change
DJIA36,338.3031,318.4432,151.712.66%-11.52%
Nasdaq15,644.9711,630.8612,112.314.14%-22.58%
S&P 5004,766.183,924.264,067.363.65%-14.66%
Russell 20002,245.311,809.751,882.854.04%-16.14%
Global Dow4,137.633,499.313,564.661.87%-13.85%
Fed. Funds target rate0.00%-0.25%2.25%-2.50%2.25%-2.50%75 bps225 bps
10-year Treasuries1.51%3.19%3.32%13 bps181 bps
US Dollar-DXY95.64109.57108.98-0.54%13.95%
Crude Oil-CL=F$75.44$87.19$86.26-1.07%14.34%
Gold-GC=F$1,830.30$1,721.60$1,727.100.32%-5.64%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • According to the latest report the S&P Global US Services PMI™ revealed that business activity in the services sector in August contracted at its sharpest pace since May 2020. Weak domestic and foreign demand stunted new orders, which led to the softest rate of hiring in the services sector since January. Input and output cost inflation eased to the slowest rate in a year and a half.
  • The goods and services trade deficit for July declined by $10.2 billion, or 12.6%, from June. A marginal (0.2%) increase in exports was outpaced by a 2.9% drop in imports. Year to date, the goods and services deficit increased by $136.6 billion, or 29.0%, from the same period in 2021. Exports increased 19.9%, while imports increased 22.1%.
  • The national average retail price for regular gasoline was $3.746 per gallon on September 5, $0.081 per gallon below the prior week’s price but $0.570 higher than a year ago. Also as of September 5, the East Coast price decreased $0.109 to $3.613 per gallon; the Gulf Coast price fell $0.127 to $3.229 per gallon; the Midwest price dropped $0.037 to $3.638 per gallon; the West Coast price slid $0.042 to $4.741 per gallon; and the Rocky Mountain price fell $0.080 to $3.940 per gallon. Residential heating oil prices averaged $3.578 per gallon on September 2, about $0.430 per gallon less than the prior week’s price.
  • For the week ended September 3, there were 222,000 new claims for unemployment insurance, a decrease of 6,000 from the previous week’s level, which was revised down by 4,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended August 27 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 27 was 1,473,000, an increase of 36,000 from the previous week’s level, which was revised down by 1,000. States and territories with the highest insured unemployment rates for the week ended August 20 were New Jersey (2.2%), California (1.9%), Rhode Island (1.8%), Connecticut (1.7%), New York (1.7%), Puerto Rico (1.7%), Massachusetts (1.5%), Pennsylvania (1.3%), and Nevada (1.2%). The largest increases in initial claims for the week ended August 27 were in New York (+4,630), Michigan (+1,199), South Carolina (+290), Hawaii (+263), and New Jersey (+256), while the largest decreases were in Connecticut (-2,635), Oklahoma (-1,260), Missouri (-1,250), Georgia (-853), and California (-802).
  •  

Eye on the Week Ahead

Several important indicators of inflation are out this week with the August releases of the Consumer Price Index, the Producer Price Index, and the report on import and export prices. Each of these indicators showed that inflation subsided in July with the CPI registering no change, while producer prices fell 0.5%, import prices dipped 1.4%, and export prices slid 3.3%. Similar data for August may influence the Federal Reserve to scale back its current aggressive economic tightening policy.

What I’m Watching This Week – 6 September 2022

The Markets (as of market close September 2, 2022)

Equities suffered losses for the third consecutive week, as investors anticipated continued aggressive moves by the Federal Reserve to combat inflation. The S&P 500 extended its longest losing streak since mid-June. The latest labor report (see below) seemed to validate the Fed’s contention that the economy is strong enough to endure more tightening. The tech-heavy Nasdaq and the Russell 2000 lost more than 4.0%. Meanwhile, a key Russian gas pipeline to Europe remained closed, increasing the likelihood of blackouts and rationing. Restrictions on natural gas supplies, coupled with the possibility that the European Central Bank could raise interest rates by 75 basis points, is worried investors about the probability of an economic recession in Europe that would impact the U.S. economy. Weakening demand sent crude oil prices lower. The dollar inched higher, while gold prices declined.

Stocks continued to trend lower last Monday, adding to the prior week’s losses. Each of the benchmark indexes listed here fell deeper into the red, led by the Nasdaq, which slid 1.0%, dragged lower by falling megacap technology and growth shares. The Russell 2000 (-0.9%), the S&P 500 (-0.7%), the Global Dow and the Dow (-0.6%) also dropped lower, while the yield on 10-year Treasuries added 7.5 basis points, closing at 3.11% as bond prices slid lower. Crude oil prices jumped $3.78 to hit $96.84 per barrel on possible OPEC+ output cuts. The dollar ended the day flat, while gold prices inched higher.

Wall Street saw stocks fall for a third consecutive session last Tuesday. The Nasdaq and the S&P 500 slid to their lowest levels in a month. As more Fed officials continued to echo Fed Chair Jerome Powell’s intention to stamp down inflation, investors were preparing for ongoing interest-rate hikes and the potential of a waning economy. The Russell 2000 fell the furthest last Tuesday, closing down 1.5%, followed by the Nasdaq and the S&P 500 (-1.1%), the Dow (-1.0%), and the Global Dow (-0.9%). Crude oil prices fell nearly $5.00 to hit $92.16 per barrel amid concerns that a global recession would stunt demand. Ten-year Treasury yields were flat, ending the day where they began at 3.11%. The dollar and gold prices dipped lower.

Stocks rallied for most of the day last Wednesday, only to close the day and the month of August in the red. The Dow dropped 0.9%, while the Global Dow and the S&P 500 declined 0.8%. The Nasdaq (-0.6%) and the Russell 2000 (-0.5%) also dipped lower. Diminishing demand dragged crude oil prices lower, decreasing $2.64 to $89.00 per barrel. Yields on 10-year Treasuries added 2.3 basis points to reach 3.13%. The dollar slipped lower, while gold prices lost $14.60, lagging to $1,721.70 per ounce.

Wall Street was mixed to begin September. Last Thursday saw the large caps of the Dow (0.5%) and the S&P 500 (0.3%) close higher, while the Nasdaq (-0.3%), the Russell 2000 (-1.2%), and the Global Dow (-1.1%) edged lower. The dollar surged to a record high on speculation that the Fed will raise interest rates 75 basis points at its meeting later in the month. Ten-year Treasury yields vaulted 13.2 basis points, reaching 3.26%. Crude oil prices dropped for the third consecutive session, ending the day around $86.26 per barrel. Gold prices fell more than $20.00, slipping to $1,705.80 per ounce.

Last Friday, the majority of the benchmark indexes listed here dipped lower, with only the Global Dow ticking marginally higher. The Nasdaq slid -1.3%, while the S&P 500 and the Dow dropped 1.1% on the day. The small caps of the Russell 2000 declined 0.7%. Bond prices rose, dragging yields lower. Ten-year Treasury yields fell 7.2 basis points, closing last Friday at 3.19%. Crude oil prices inched up to $86.87 per barrel. The dollar was relatively flat, while gold prices climbed higher.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 9/2Weekly ChangeYTD Change
DJIA36,338.3032,283.4031,318.44-2.99%-13.81%
Nasdaq15,644.9712,141.7111,630.86-4.21%-25.66%
S&P 5004,766.184,057.663,924.26-3.29%-17.66%
Russell 20002,245.311,899.841,809.75-4.74%-19.40%
Global Dow4,137.633,607.693,499.31-3.00%-15.43%
Fed. Funds target rate0.00%-0.25%2.25%-2.50%2.25%-2.50%75 bps225 bps
10-year Treasuries1.51%3.03%3.19%16 bps168 bps
US Dollar-DXY95.64108.81109.570.70%14.57%
Crude Oil-CL=F$75.44$92.91$87.19-6.16%15.58%
Gold-GC=F$1,830.30$1,749.90$1,721.60-1.62%-5.94%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Job gains slowed slightly in August, although they came in on the high side of expectations. According to the latest data from the Bureau of Labor Statistics, there were 315,000 new jobs added last month, down from July’s total of 526,000. Nevertheless, total employment has risen 5.8 million over the past 12 months, which is 240,000 higher than its pre-pandemic level in February 2020. In August, job growth occurred in professional and business services, health care, and retail trade. The unemployment rate rose 0.2 percentage point to 3.7%, and the number of unemployed persons increased by 344,000 to 6.0 million. The number of people who permanently lost jobs increased by 188,000 to 1.4 million. The labor force participation rate increased by 0.3 percentage point to 62.4%, 1.0 percentage point below its February 2020 level. The employment-population ratio was little changed at 60.1% in August and remains 1.1 percentage point below its February 2020 value. In August, 6.5% of employed persons teleworked because of the coronavirus pandemic, down from 7.1% in the prior month. However, 1.9 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic — down from 2.2 million in July. In August, average hourly earnings increased by $0.10 to $32.36. Average hourly earnings have risen 5.2% over the past 12 months. The average workweek decreased by 0.1 hour to 34.5 hours last month. While labor conditions lost some momentum in August, there is still plenty of strength in the overall data, enough to support the Federal Reserve’s aggressive policies to curb inflation.
  • In July, there were 11.2 million job openings, little changed from the previous month, according to the latest Job Openings and Labor Turnover Summary. Hires and separations in July were 6.4 million and 5.9 million, respectively, also little changed from June’s totals. Within separations, the number of quits can serve as a measure of workers’ willingness or ability to leave jobs. There were 4.2 million quits in July, relatively unchanged since April 2022.
  • The S&P Global US Manufacturing Purchasing Managers’ Index™ posted 51.5 in August, down from 52.2 in July. The August reading was the lowest since July 2020. New orders fell for the third consecutive month in August as the impact of rising inflation and economic uncertainty diminished client demand. While employment rose, it did so at the slowest pace since January, as backlogs of work increased only marginally. In an effort to drive sales and pass on some of the moderation in costs, price increases were at the weakest rate in more than a year and a half.
  • The national average retail price for regular gasoline was $3.827 per gallon on August 29, $0.053 per gallon below the prior week’s price but $0.688 higher than a year ago. Also as of August 29, the East Coast price decreased $0.044 to $3.722 per gallon; the Gulf Coast price fell $0.047 to $3.356 per gallon; the Midwest price dropped $0.055 to $3.675 per gallon; the West Coast price slid $0.066 to $4.783 per gallon; and the Rocky Mountain price fell $0.132 to $4.020 per gallon. Residential heating oil prices averaged $4.008 per gallon on August 26, about $0.307 per gallon more than the prior week’s price. According to the U.S. Energy Information Administration report of August 31, the retail price for regular gasoline averaged $3.83 per gallon on August 29, the Monday before the Labor Day weekend. This is an increase of $0.69 per gallon from the same time in 2021. Retail gasoline prices have fallen every week since June 13. Nevertheless, retail gasoline prices ahead of Labor Day were the highest since 2014.
  • For the week ended August 27, there were 232,000 new claims for unemployment insurance, a decrease of 5,000 from the previous week’s level, which was revised down by 6,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended August 20 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 20 was 1,438,000, an increase of 26,000 from the previous week’s level, which was revised down by 3,000. States and territories with the highest insured unemployment rates for the week ended August 13 were New Jersey (2.2%), Puerto Rico (2.0%), Connecticut (1.9%), California (1.8%), Rhode Island (1.8%), New York (1.6%), Massachusetts (1.5%), Pennsylvania (1.5%), Alaska (1.2%), Illinois (1.2%), Oregon (1.2%), and Nevada (1.2%). The largest increases in initial claims for the week ended August 20 were in Arkansas (+451), Illinois (+428), Connecticut (+390), New York (+336), and Rhode Island (+219), while the largest decreases were in California (-2,130), New Jersey (-1,400), Indiana (-1,263), Oklahoma (-1,174), and Michigan (-714).

Eye on the Week Ahead

Labor Day week has a dearth of major economic data available. Aside from the trade deficit report, which is for July, and the services purchasing managers’ index, there is little else available. Trading should also be light this holiday-shortened week.

Monthly Market Review – August 2022

The Markets (as of market close August 31, 2022)

Through the first half of August, the stock market continued to ride July’s rally. Including the first two weeks of August, stocks had posted four consecutive weekly gains — the longest weekly rally of 2022. The latest inflation data showed prices had fallen in July, bolstering investor confidence that the Fed may begin to reel in its aggressive interest-rate hike policy. By mid-August, the S&P 500 had recouped half of its losses from the beginning of the year, and the Nasdaq had risen over 20.0% from its low in June. U.S. corporate profits rose 9.1% to a fresh record high of $2.62 trillion in the second quarter of 2022, following a 4.9% drop in the previous period. It appeared that even if the Fed continued its hawkish push to get inflation down to the 2.0% target, the economy had thus far been resilient, with the labor market continuing to show strength, while industrial production advanced.

Despite these developments, Federal Reserve officials maintained their hawkish rhetoric. Then the stock rally of the summer of 2022 came to an abrupt end. First, the release of the minutes of the July meeting of the Federal Open Market Committee, revealing that several Committee members were concerned that inflation remained unacceptably high, and that, despite declines in oil and some commodities, there was little evidence to date that inflation pressures were subsiding. Then Fed Chair Jerome Powell spoke before the Jackson Hole Economic Symposium and reiterated the Fed’s resolve to stamp down inflation, even if that means slower economic growth and “some pain on households.” Investors reacted by pulling from equities, sending stock values lower, while giving back gains enjoyed earlier in the month. Each of the benchmark indexes ended August in the red, led by the tech-heavy Nasdaq, followed by the S&P 500 and the Dow.

Bond prices also fell in August, pushing yields higher. Ten-year Treasury yields rose nearly 50 basis points in August. Two-year Treasury yields were about 33 basis points higher, resulting in an inverted yield curve, which may be an indicator of a recession. The dollar rose higher against a basket of world currencies. Gold, like most other commodities, slid lower in August.

Crude oil prices declined for the third consecutive month in August, as rising inflation has cut into consumer spending, weakening demand. Gas prices also continued to fall in August after reaching record highs in May and June. The national average retail price for regular gasoline was $3.827 per gallon on August 29, down from $4.330 on July 25 but $0.688 higher than a year ago.

Stock Market Indexes

Market/Index2021 ClosePrior MonthAs of August 31Monthly ChangeYTD Change
DJIA36,338.3032,845.1331,510.43-4.06%-13.29%
Nasdaq15,644.9712,390.6911,816.20-4.64%-24.47%
S&P 5004,766.184,130.293,955.00-4.24%-17.02%
Russell 20002,245.311,885.731,844.12-2.21%-17.87%
Global Dow4,137.633,639.483,528.62-3.05%-14.72%
Fed. Funds target rate0.00%-0.25%2.25%-2.50%2.25%-2.50%75 bps225 bps
10-year Treasuries1.51%2.64%3.13%49 bps162 bps
US Dollar-DXY95.64105.83108.712.72%13.67%
Crude Oil-CL=F$75.44$98.23$89.00-9.40%17.97%
Gold-GC=F$1,830.30$1,778.80$1,721.70-3.21%-5.93%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.

Latest Economic Reports

  • Employment: Employment rose by 528,000 in July, well above the revised June total of 398,000 and exceeding the prior four-month average (388,000). Job growth was widespread in July, led by gains in professional and business services, leisure and hospitality, and health care. With the July increase, employment has increased by 22.0 million since reaching a low in April 2020 and has returned to its pre-pandemic level of February 2020. The unemployment rate edged down to 3.5% in July, and the number of unemployed persons dipped marginally to 5.7 million, with both measures returning to their pre-pandemic levels. Among the unemployed, the number of workers who permanently lost their jobs was 1.2 million in July (1.3 million in June). In July, the number of persons who were unable to work because their employer closed or lost business due to the pandemic rose to 2.2 million, up from 2.1 million in June. The labor force participation rate was little changed at 62.1% in July. The employment-population ratio, at 60.0%, was also little changed from the previous month. Both measures remain below their February 2020 values (63.4% and 61.2%, respectively). In July, average hourly earnings rose by $0.15 to $32.27. Over the 12 months ended in July, average hourly earnings increased by 5.2%. The average work week was 34.6 hours in July, unchanged for the fiftieth month in a row.
  • There were 243,000 initial claims for unemployment insurance for the week ended August 20 (256,000 on July 23), while the total number of insured unemployment claims was 1,415,000 as of August 13 (1,359,000 on July 16). A year ago, there were 395,000 initial claims for unemployment insurance and 2,804,000 total insured unemployment claims.
  • FOMC/interest rates: The Federal Open Market Committee did not meet in August and does not meet again until mid-September. Nevertheless, much of the rhetoric from Federal Reserve officials points to another interest-rate hike of at least 75 basis points.
  • GDP/budget: The economy has decelerated for two quarters in a row. Gross domestic product decreased 0.6% in the second quarter of 2022 after falling 1.6% in the first quarter. A portion of the second-quarter downturn is attributable to sectors impacted by higher interest rates that are cutting into demand (e.g., housing, nonresidential fixed investment), while rising inflation and ongoing supply-chain disruptions are impacting production. Consumer spending rose 1.5% in the second quarter after increasing 1.8% in the first quarter. Most of the increase in consumer spending is attributable to a 3.6% jump in services, while spending on durables slid 0.1%. Also dragging down GDP was a 4.5% decline in fixed investment, within which residential fixed investment dropped 16.2%, evidence of the slowdown in the housing sector. Nonresidential (business) fixed investment was unchanged in the second quarter after rising 10.0% in the previous quarter. Exports rose 17.6% in the second quarter, while imports, which are a negative in the calculation of GDP, advanced 2.8% after jumping 18.9% in the first quarter. In the second quarter, the personal consumption expenditures price index, a measure of inflation, increased 7.1%, the same increase as in the first quarter.
  • The Treasury budget deficit came in at $211.1 billion in July, up from $88.8 billion in June but down from the deficit of $302.1 billion in July 2021. Through the first 10 months of fiscal year 2022, the deficit sits at $726.1 billion, $1,813.9 billion lower than the deficit over the same period in fiscal year 2021, as outlays dropped $1,027.2 billion while receipts increased $786.6 billion. So far in this fiscal year, individual income tax receipts have risen 32.7%, and corporate income tax receipts have increased 11.4%.
  • Inflation/consumer spending: Overall, inflationary pressures weakened in July. According to the latest Personal Income and Outlays report, the personal consumption expenditures price index, a measure of inflation favored by the Federal Reserve, fell 0.1% in July after increasing 1.0% the previous month. Consumer prices have risen 6.3% since July 2021, down from the 12-month spread for the period ended in June 2021 (6.8%). Personal income and disposable personal income increased 0.2% in July after increasing 0.7% in June. Consumer spending inched up 0.1% in July, following a 1.0% increase in June.
  • The Consumer Price Index was unchanged in July after climbing 1.3% in the previous month. For the 12 months ended in July, the CPI increased 8.5% (9.1% for the 12-month period ended in June). Both the monthly and 12-month rates were below expectations. In July, the CPI less food and energy rose 0.3% after increasing 0.7% in June. Pulling the CPI lower in July was a 7.7% drop in gasoline prices, offsetting a 1.1% increase in prices for food and a 0.5% rise in prices for shelter. Nevertheless, for the 12 months ended in July, food prices are up 10.9%, the largest increase since May 1979. And despite the decline in July, gasoline prices have risen 44.0% over the last 12 months.
  • Prices that producers receive for goods and services dipped 0.5% in July, following increases of 1.0% in June and 0.8% in May. Producer prices have increased 9.8% since July 2021 (11.3% for the 12 months ended in June). Prices less foods, energy, and trade services increased 0.2% in July and 5.8% since July 2021. In July, the decrease in the producer price index was attributable to a 1.8% decline in prices for goods, the largest decline since April 2020. In contrast, prices for services advanced 0.1%. In July, 80.0% of the drop in prices for goods was attributable to a 16.7% decrease in gasoline prices. Food prices, on the other hand, rose 1.0% in July after falling 0.2% in June.
  • Housing: Sales of existing homes retreated for the sixth consecutive month in July, falling 5.9% from the June estimate. Year over year, existing home sales were 20.2% under the July 2021 total. According to the latest survey from the National Association of Realtors®, mortgage rates have risen sharply over a short span of time, impacting potential home buyers. The median existing-home price was $403,800 in July, down from $413,800 in June but 10.8% higher than July 2021 ($364,600). Unsold inventory of existing homes represents a 3.3-month supply at the current sales pace, up from a 2.9-month supply in June. Sales of existing single-family homes also fell, down 5.5% in July. Sales of existing single-family homes have fallen 19.0% since June 2021. The median existing single-family home price was $410,600 in July, down from $420,900 in June but 130.6% over the July 2021 price.
  • Sales of new single-family homes also declined in July, falling 12.6% from June’s total and 29.6% from July 2021. The median sales price of new single-family houses sold in July was $439,400 ($414,900 in June). The July average sales price was $546,800 ($457,300 in June). The inventory of new single-family homes for sale in July represent a supply of 10.9 months at the current sales pace, up from June’s 9.2-month supply.
  • Manufacturing: Industrial production increased 0.6% in July. Industrial production was flat in June. In July, manufacturing output gained 0.7% after falling 0.4% in each of the previous two months. The production of motor vehicles and parts rose 6.6% in July, while factory output elsewhere moved up 0.3%. In July, the index for mining rose 0.7%, while the index for utilities fell 0.8%. Overall, total industrial production in July was 3.9% higher than it was a year earlier. Since July 2021, manufacturing has risen 3.2%, mining has jumped 7.9%, while utilities have increased 2.2%.
  • July saw new orders for durable goods increase less than $0.1 billion, virtually unchanged from the June total. Excluding transportation, new orders rose 0.3% in July. Excluding defense, new orders increased 1.2%. Transportation equipment, up for three consecutive months, decreased in July, falling 0.7% from the previous month.
  • Imports and exports: Import prices declined 1.4% in July for the first time since December 2021, according to the U.S. Bureau of Labor Statistics. Prices rose 0.3% in June. The July decrease in import prices was the largest monthly decline since April 2020. Import prices rose 8.8% over the past 12 months, the smallest year-over-year increase since the 12-month period ended in March 2021. In July, lower fuel and nonfuel prices contributed to the monthly decrease. Fuel import prices fell 7.5% in July, following a 6.2% increase the previous month. Despite the July decline, import fuel prices advanced 56.6% over the past year. Prices for nonfuel imports declined for the third consecutive month, dipping 0.5% in July. Prices for U.S. exports fell 3.3% in July following a 0.7% rise the previous month. The July decline in export prices was the largest monthly decrease since April 2020. Lower agricultural and nonagricultural prices contributed to the July decline. Prices for exports have risen 13.1% since July 2021, the lowest annual advance since the 12-month period ended in March 2021.
  • The international trade in goods deficit was $89.1 billion in July, down $9.5 billion, or 9.7%, from June. Exports of goods were $181.0 billion in July, $0.4 billion less than in June. Imports of goods were $270.0 billion in July, $9.9 billion less than June imports.
  • The latest information on international trade in goods and services, released August 4, is for June and shows that the goods and services trade deficit declined by $5.3 billion, or 6.2%, to $79.6 billion from the May deficit. June exports were $260.8 billion, $4.2 billion more than May exports. June imports were $340.4 billion, $1.0 billion lower than May imports. Year over year, the goods and services deficit increased $134.1 billion, or 33.4%, from the same period in 2021. Exports increased $246.2 billion, or 20.0%. Imports increased $380.3 billion, or 23.3%.
  • International markets: Inflationary pressures continued to be felt around the world. Consumer prices rose 9.1% in the eurozone from a year earlier, increasing the likelihood that the European Central Bank will respond by aggressively raising interest rates. Vaulting inflation underscored the continued impact of the Russia-Ukraine war on Europe. In its latest move, Russia shut down its main artery for natural gas to Europe for maintenance, prompting European nations to scramble to fill gas storage facilities to prevent a shortage in the winter. Elsewhere, China’s factory activity remained in contraction in August, resulting in U.S. business confidence in China falling. Overall for the markets in August, the STOXX Europe 600 Index slid 4.5%. The United Kingdom’s FTSE fell nearly 2.0%. Japan’s Nikkei 225 Index rose 1.25%, while China’s Shanghai Composite Index advanced 1.2%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® increased in August for the first time in the last four months. The August index stands at 103.2, up from 95.3 in July. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, improved to 145.4 in August, up from 139.7 in July. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, rose to 75.1 in August (65.6 in July).

Eye on the Month Ahead

The Federal Open Market Committee meeting in the middle of September is expected to culminate in an interest-rate hike of at least 75 basis points. Investors remain concerned that the Fed’s actions taken to try to slow inflation will also push the economy into a recession. Some economic sectors are showing signs of slowing down, particularly housing and retail sales, while gross domestic product retracted in the second quarter. As the third quarter of the year comes to a close, September may prove to be a month of more noticeable economic waning.

What I’m Watching This Week – 29 August 2022

The Markets (as of market close August 26, 2022)

Despite evidence that inflation may be slowing, the central bank is committed to fighting inflation, according to last Friday’s speech from Federal Reserve Chair Jerome Powell. Wall Street may have held out hope that the Fed would scale back its aggressive bent to reel in rising prices, but that wish apparently turned to disappointment after Powell stated that “Restoring price stability will likely require maintaining a restrictive policy stance for some time.” In response, traders moved away from stocks, sending each of the benchmark indexes listed here notably lower. All 11 market sectors of the S&P 500 closed lower, with information technology, communication services, and consumer discretionary declining the furthest. Ten-year Treasury yields closed last week up 5.0 basis points. Crude oil prices rose over $3.00 but remained well below $100 per barrel. The dollar advanced, while gold prices slid lower.

Last Monday saw Wall Street suffer its worst day in nearly two months as each of the benchmark indexes listed closed sharply lower. Investors have been bracing for a hawkish tone from Federal Reserve officials at the Jackson Hole retreat later in the week. The Nasdaq underperformed, falling 2.6%. The S&P 500, which was heading for its best start to a third quarter since 1932, dropped 2.1%. The Dow, which lost over 600 points, ended the session down 1.9%. The small caps of the Russell 2000 declined 2.1%, and the Global Dow lost 1.5%. Ten-year Treasury yields surpassed 3.00% for the first time since mid-July after adding 4.8 basis points. Crude oil prices ended the day relatively flat to close at about $90.67 per barrel. The dollar rose nearly 1.0%, while gold prices fell nearly 1.0%.

Stocks were mixed last Tuesday, with the Dow (-0.5%) and the S&P 500 (-0.2%) sliding; the Nasdaq and the Global Dow ended flat, while the Russell 2000 (0.2%) inched higher. Crude oil prices jumped $3.24 to hit $93.60 per barrel. The dollar fell, while gold prices advanced. Ten-year Treasury yields added 1.7 basis points to reach 3.05%. Despite slipping lower, the yield on two-year Treasuries was 3.30%, still well above the yield on 10-year Treasuries, creating an inverted yield curve, a possible indicator of a future recession.

Equities edged marginally higher last Wednesday, following a day of relatively light trading. Investors may have been waiting for the government’s next move as it battles inflationary pressures. The Russell 2000 gained 0.8%, followed by the Nasdaq (0.4%), the S&P 500 (0.3%), and the Dow (0.2%). The Global Dow ended the day flat. Ten-year Treasury yields added 5.2 basis points to close at 3.10%. Crude oil prices rose to $95.37 per barrel. The dollar dipped lower, while gold prices advanced.

Stocks ended higher last Thursday as investors plucked low-hanging stocks following recent downturns. The Nasdaq (1.7%), the Russell 2000 (1.5%), and the S&P 500 (1.4%) notched solid gains. The Dow and the Global Dow rose 1.0% by the end of the trading session. Among the market sectors, energy, materials, financials, and industrials led the way. Ten-year Treasury yields fell 8.0 basis points, closing at 3.02%. The dollar and crude oil prices slid lower, while gold prices advanced for the third consecutive day.

Wall Street plunged last Friday on the heels of Fed Chair Jerome Powell’s hawkish Jackson Hole speech. The S&P 500 (-3.4%) had its worst day since the middle of June, and the Nasdaq lost 4.0%. Powell said that another “unusually large” interest-rate increase may be in the offing next month. The Russell 2000 (-3.2%), the Dow (-3.0%), and the Global Dow (-1.9%) also closed in the red. Ten-year Treasury yields rose 9.0 basis points to reach 3.03%. The dollar and crude oil prices increased, while gold prices ended a three-day rally, falling $21.50 per ounce.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 8/26Weekly ChangeYTD Change
DJIA36,338.3033,706.7432,283.40-4.22%-11.16%
Nasdaq15,644.9712,705.2112,141.71-4.44%-22.39%
S&P 5004,766.184,228.484,057.66-4.04%-14.87%
Russell 20002,245.311,957.351,899.84-2.94%-15.39%
Global Dow4,137.633,689.633,607.69-2.22%-12.81%
Fed. Funds target rate0.00%-0.25%2.25%-2.50%2.25%-2.50%75 bps225 bps
10-year Treasuries1.51%2.98%3.03%5 bps152 bps
US Dollar-DXY95.64108.09108.810.67%13.77%
Crude Oil-CL=F$75.44$90.05$92.913.18%23.16%
Gold-GC=F$1,830.30$1,760.90$1,749.90-0.62%-4.39%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • According to the second estimate of second-quarter gross domestic product, the economy contracted by 0.6%. GDP decreased 1.6% in the first quarter. Consumer spending, up 1.5% in the second quarter, has buoyed the economy, which is otherwise feeling the negative effects of elevated inflation, supply chain disruptions, and higher interest rates. Gross investment fell 13.2%, as residential investment dropped 16.2% and investment in nonresidential structures decreased 13.2%. The personal consumption expenditures price index, a measure of inflation, increased 7.1% in the second quarter. Excluding food and energy, consumer prices rose 4.4%.
  • The personal consumption expenditures price index dipped 0.1% in July, according to the latest personal income and outlays report. July also saw the consumer price index, import and export prices, and producer prices either flat or decreasing. The PCE price index rose 1.0% in June. Excluding food and energy, prices increased 0.1%. Personal consumption expenditures, a measure of consumer spending, inched up 0.1% in July. Consumers spent more on services, which rose 0.3%, while expenditures on goods slipped 0.2%. Consumer spending increased in housing and utilities and “other” services (mainly international travel), while a decrease in spending on gasoline and energy contributed to the decrease in spending on goods. Both personal income and disposable (after-tax) personal income rose 0.2% in July.
  • The international trade in goods deficit fell 9.7% in July. Exports declined 0.2% and imports dropped 3.5%. Only exports of automotive vehicles, etc., and capital goods increased in July. Exports of foods, feeds, and beverages; industrial supplies; and consumer goods decreased. The 3.5% decline in July imports followed a 0.4% decrease in June, evidencing a slowdown in domestic demand.
  • The housing sector continued to slump in July. According to the latest data from the Census Bureau, sales of new single-family homes fell 12.6% from their June total. Sales are down 29.6% from July 2021. Despite the decline, home prices rose in July. The median sales price of new homes sold in July was $439,400, up from June’s median price of $414,900. The July average price was $546,800, nearly 20.0% over the June average sales price of $457,300. Both the median and average sales prices for new single-family homes were well above their respective values from a year ago. The July 2022 median price was 8.2% above the July 2021 price, while the average sales price in July was 18.2% higher than the July 2021 price. The number of new single-family homes for sale rose in July from the previous month. The inventory sits at a 10.9-month supply, up from the June figure of 9.2 months.
  • The total value of new orders for manufactured durable goods in July was essentially unchanged from the previous month. Excluding transportation, new orders increased 0.3%. Excluding defense, new orders rose 1.2%. Transportation equipment, slipped 0.7% in July, following three consecutive monthly increases. Shipments of durable goods increased in July for the 14th of the last 15 months. New orders for nondefense capital goods in July increased 2.8%, while new orders for defense capital goods rose 8.7%. Since July 2021, new orders for durable goods have increased 10.8%.
  • The national average retail price for regular gasoline was $3.880 per gallon on August 22, $0.058 per gallon below the prior week’s price but $0.735 higher than a year ago. Also as of August 22, the East Coast price decreased $0.090 to $3.766 per gallon; the Gulf Coast price fell $0.025 to $3.403 per gallon; the Midwest price dropped $0.025 to $3.730 per gallon; the West Coast price slid $0.065 to $4.849 per gallon; and the Rocky Mountain price fell $0.061 to $4.152 per gallon. Residential heating oil prices averaged $3.701 per gallon on August 19, about $0.183 per gallon more than the prior week’s price. According to the U.S. Energy Information Administration report of August 24, members of OPEC will earn about $842 billion in oil export revenue in 2022, the most inflation-adjusted net oil export revenue for the group since 2014. OPEC liquids production and crude oil prices in 2022 will be nearly 50.0% greater than in 2021. According to the report, crude oil prices had been generally increasing since late 2020, when global consumption began to outpace production, resulting in inventory draws. However, prices further increased sharply following Russia’s invasion of Ukraine in February 2022.
  • For the week ended August 20, there were 243,000 new claims for unemployment insurance, a decrease of 2,000 from the previous week’s level, which was revised down by 5,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended August 13 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 13 was 1,415,000, a decrease of 19,000 from the previous week’s level, which was revised down by 3,000. States and territories with the highest insured unemployment rates for the week ended August 6 were New Jersey (2.2%), Puerto Rico (2.2%), California (1.9%), Connecticut (1.8%), Rhode Island (1.8%), Massachusetts (1.6%), New York (1.6%), Pennsylvania (1.4%), Alaska (1.2%), Illinois (1.2%), and Nevada (1.2%). The largest increases in initial claims for the week ended August 13 were in Oklahoma (+1,419), Missouri (+1,014), Indiana (+691), Virginia (+404), and Michigan (+318), while the largest decreases were in California (-3,185), Ohio (-1,659), Georgia (-946), South Carolina (-847), and Pennsylvania (-617).

Eye on the Week Ahead

The employment figures for August are released this week. The labor sector has been quite strong for much of the year. July saw over 500,000 new jobs added, while average weekly wages have risen 5.2% over the past 12 months.

What I’m Watching This Week – 22 August 2022

The Markets (as of market close August 19, 2022)

The four-week rally for stocks came to an end last week. Investors turned cautious after Fed officials continued to support more interest-rate hikes. Each of the benchmark indexes listed here lost ground, with the S&P 500 declining for the first time in five weeks. Yields on 10-year Treasuries climbed 14.0 basis points. The dollar had its best week since April 2020. Crude oil prices fell by nearly $2.00 per barrel. Gold plunged lower, falling nearly $60.00 per ounce. Traders saw the stock of a large retailer fall more than 40.0%, and cryptocurrency-linked stocks declined.

Wall Street opened last Monday on an uptick. Megacap shares led the rally, with the Nasdaq adding 0.6%. The Dow (0.5%), the S&P 500 (0.4%), and the Russell 2000 (0.2%) also advanced. The Global Dow dipped 0.2%, likely impacted after China’s economy slowed unexpectedly in July. Ten-year Treasury yields slid 5.8 basis points to close at 2.79%. Crude oil fell over $4.00, dipping to $87.85 per barrel. The dollar advanced, while gold prices declined.

Stocks closed generally higher last Tuesday, despite a late session pullback in tech shares. The Dow (0.7%), the Global Dow (0.7%), and the S&P 500 (0.2%) posted modest gains. The Nasdaq (-0.2%) slipped, while the Russell 2000 was flat. Crude oil prices slid to $86.90 per barrel, down by $2.46. Ten-year Treasury yields rose 3.3 basis points to 2.82%. The dollar and gold prices declined.

Last Wednesday saw stocks close lower following the release of the minutes of the Federal Reserve’s July meeting. The Dow slid 0.5%, ending a five-session winning streak. The minutes revealed that several members of the Federal Open Market Committee remained concerned that rising inflation could become entrenched in the economy, while expressing trepidation that too much tightening could send the economy reeling. Tech shares fell for the second consecutive session, dragging the Nasdaq down 1.3%. The Russell 2000 fell 1.7%, the S&P 500 dipped 0.7%, and the Global Dow lost 0.4%. The yield on 10-year Treasuries jumped 6.9 basis points to reach 2.89%. Crude oil prices advanced to $87.74 per barrel. The dollar rose, while gold prices continued to decline.

In a day marked by ups and downs, stocks closed marginally higher last Thursday among mixed economic and earnings data. The Russell 2000 led the benchmark indexes listed here, gaining 0.7%, followed by the Nasdaq and the S&P 500, which advanced 0.2%. The Dow inched up 0.1%, and the Global Dow was flat. Crude oil prices shot up $2.45 to hit $90.56 per barrel. The dollar gained, while gold prices fell for the fourth consecutive session.

Stocks closed last Friday lower, with each of the benchmark indexes ending the day in the red. The Nasdaq (-2.0%) and the Russell 2000 (-2.2%) lost the most ground, followed by the S&P 500 (-1.3%), the Global Dow (-1.2%), and the Dow (-0.9%). Ten-year Treasury yields picked up nearly 11.0 basis points to end the week at 2.98%. Crude oil prices slipped less than $1.00, closing at $90.05 per barrel. The dollar advanced for the third consecutive day, while gold prices fell for the fifth day in a row.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 8/19Weekly ChangeYTD Change
DJIA36,338.3033,761.0533,706.74-0.16%-7.24%
Nasdaq15,644.9713,047.1912,705.21-2.62%-18.79%
S&P 5004,766.184,280.154,228.48-1.21%-11.28%
Russell 20002,245.312,016.621,957.35-2.94%-12.82%
Global Dow4,137.633,741.513,689.63-1.39%-10.83%
Fed. Funds target rate0.00%-0.25%2.25%-2.50%2.25%-2.50%75 bps225 bps
10-year Treasuries1.51%2.84%2.98%14 bps147 bps
US Dollar-DXY95.64105.68108.082.28%13.02%
Crude Oil-CL=F$75.44$91.88$90.05-1.99%19.37%
Gold-GC=F$1,830.30$1,816.80$1,760.90-3.08%-3.79%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Sales of existing homes declined 5.9% in July, the sixth straight monthly decline. Year over year, existing home sales are down 20.2%. According to a report from the National Association of Realtors®, rising mortgage rates, which peaked at 6.0% at the end of June, impacted existing home sales. Since then, mortgage rates have declined to near 5.0%, which should bring more buyers back to the market. Total existing housing inventory in July was 1,310,000, reflecting a supply of 3.3 months at the current sales pace. The median existing home price was $403,800, down from the June sales price of $413,800 but ahead of the July 2021 price of $364,600. Sales of existing single-family homes declined 5.5% in July and 19.0% from a year ago. The median existing single-family home price was $410,600 in July, down from the June price of $420,900 but up from the July 2021 price of $371,400.
  • Building permits issued for new housing fell 1.3% in July but are 1.1% ahead of the July 2021 rate. Permits for single family housing also declined in July, dropping 4.3%. Last month saw housing starts slip 9.6% (-10.1% for single family housing starts). Housing completions rose 1.1% in July, although completions of single family homes dipped -0.8%.
  • Industrial production rose 0.6% in July after making no advance the prior month. Manufacturing output increased 0.7% last month following 0.4% declines in both May and June. Contributing to the production increase in July was a 6.6% rise in the production of motor vehicles and parts, while factory output elsewhere moved up 0.3%. The index for mining increased 0.7%, while the index for utilities decreased 0.8%. Overall, total industrial production in July was 3.9% above its year-earlier level.
  • Retail sales were unchanged in July from their June total. However, sales at the retail level were 10.3% above the July 2021 pace. Retail trade sales were also unchanged in July from the previous month, but are up 10.1% from a year ago. In July, sales at motor vehicle and parts dealers fell 1.6%, gasoline station sales dipped 1.8%, and sales at general merchandise stores decreased 0.7%. Retail sales advanced at food services and drinking places (0.1%), nonstore (online) retailers (2.7%), miscellaneous store retailers (1.5%), and building material and garden equipment and supplies stores (1.5%).
  • The national average retail price for regular gasoline was $3.938 per gallon on August 15, $0.100 per gallon below the prior week’s price but $0.764 higher than a year ago. Also as of August 15, the East Coast price decreased $0.111 to $3.856 per gallon; the Gulf Coast price fell $0.107 to $3.428 per gallon; the Midwest price dropped $0.096 to $3.755 per gallon; the West Coast price slid $0.085 to $4.914 per gallon; and the Rocky Mountain price fell $0.140 to $4.213 per gallon. Residential heating oil prices averaged $3.518 per gallon on August 12, about $0.302 per gallon more than the prior week’s price.
  • For the week ended August 13, there were 250,000 new claims for unemployment insurance, a decrease of 2,000 from the previous week’s level, which was revised down by 10,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended August 6 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 6 was 1,437,000, an increase of 7,000 from the previous week’s level, which was revised up by 2,000. States and territories with the highest insured unemployment rates for the week ended July 30 were Connecticut (2.4%), Puerto Rico (2.3%), New Jersey (2.1%), California (1.9%), Rhode Island (1.8%), Massachusetts (1.6%), New York (1.6%), Pennsylvania (1.5%), Alaska (1.2%), Illinois (1.2%), and Nevada (1.2%). The largest increases in initial claims for the week ended August 6 were in California (+2,759), New Jersey (+965), Texas (+723), South Carolina (+679), and Indiana (+582), while the largest decreases were in Connecticut (-7,341), Michigan (-1,075), Oklahoma (-921), Georgia (-522), and Maryland (-184).

Eye on the Week Ahead

The second estimate of gross domestic product for the second quarter is available this week. The initial reading showed the economy retracted 0.9% in the second quarter. The report on personal income and outlays for July is also out this week. Two items that will garner particular attention are personal consumption expenditures and the personal consumption expenditures price index. Consumer spending rose 1.1% in June, while consumer prices advanced 1.0%. It will be interesting to see if the PCE price index decreases in July in line with the other inflation indicators, such as the CPI, import and export prices, and the PPI.

What I’m Watching This Week – 15 August 2022

The Markets (as of market close August 12, 2022)

The stock market posted its fourth straight weekly advance, the longest consecutive weekly rally of 2022. Investors turned to stocks on the premise that the Federal Reserve may reduce the pace of its economic tightening campaign after three major indicators showed that inflation subsided in July. With this week’s performance, the S&P 500 has recouped half of its losses from the beginning of the year. The Nasdaq has risen over 20.0% from its low in June. With corporate earnings season about finished, traders are now assessing the direction of the economy. Even if the Fed continues its hawkish push to get inflation down to the 2.0% target, the economy has thus far been resilient, with the labor market continuing to show strength while corporate earnings have been generally positive. Crude oil prices have remained under $100.00 per barrel for three weeks, gold prices have nearly recovered all their losses from the beginning of the year, and consumer sentiment is on the rise. By the end of last week, each of the benchmark indexes listed here climbed by at least 2.9%, led by the Russell 2000, which rose nearly 5.0%. Ten-year Treasury yields broke even, crude oil prices increased nearly 4.0%, gold prices advanced about 1.5%, and the dollar slipped marginally.

Wall Street began last week with mixed returns. Monday saw the Dow (0.1%), the Russell 2000 (1.0%), and the Global Dow (0.6%) post modest gains, while the Nasdaq and the S&P 500 dipped 0.1%. Ten-year Treasury yields slid 7.5 basis points, falling to 2.76%. Crude oil climbed to $90.49 per barrel. The dollar fell, while gold prices surged $13.50 to $1,786.40 per ounce.

Stocks extended their losses last Tuesday ahead of the release of the July Consumer Price Index. The Nasdaq slumped 1.2% after a large computer chip manufacturer warned that its fourth-quarter revenue may not be as robust as forecast. The Russell 2000 fell 1.5%, the S&P 500 dipped 0.4%, the Dow and the Global Dow slid 0.2%. Ten-year Treasury yields increased to 2.79%. Crude oil prices changed minimally. The dollar declined, while gold prices continued to rally, adding another $5.90 to reach $1,811.10 per ounce.

Last Wednesday saw stocks climb and the dollar fall after a slower-than-expected inflation report. Investors may view the latest Consumer Price Index (see below) as supporting the notion that the Federal Reserve will ease its tightening and interest-rate hikes. The Russell 2000 (3.0%) and the Nasdaq (2.9%) led the benchmark indexes listed here, followed by the S&P 500 (2.1%), the Dow (1.6%), and the Global Dow (1.5%). Yields on 10-year Treasuries slipped minimally to 2.78%. The dollar fell over 1.0%. The rally in gold ended with prices falling $5.10 per ounce. Crude oil prices increased $1.06 to hit $91.56 per barrel.

Bond prices slid lower last Thursday, sending yields higher. Ten-year Treasury yields rose 10.2 basis points to reach 2.88%. Stocks ended the day mixed, with the Dow (0.1%), the Russell 2000 (0.3%), and the Global Dow (0.3%) gaining ground, while the Nasdaq (-0.6%) and the S&P 500 (-0.1%) declined as tech shares underperformed. Crude oil prices continued to move higher, closing at $94.14 per barrel. The dollar and gold prices dipped lower.

Stocks closed higher last Friday after another inflation indicator slid lower. Each of the benchmark indexes listed here added value, led by the Russell 2000 and the Nasdaq, which rose 2.1%. The S&P 500 advanced 1.7%, the Dow climbed 1.3%, and the Global Dow gained 0.6%. Crude oil prices ended lower for the first time last week, falling $2.46 to end the day at $91.88 per barrel. Gold prices gained $9.60, climbing to $1,816.80 per ounce. Ten-year Treasury yields slipped 3.9 basis points to 2.84%.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 8/12Weekly ChangeYTD Change
DJIA36,338.3032,803.4733,761.052.92%-7.09%
Nasdaq15,644.9712,657.5513,047.193.08%-16.60%
S&P 5004,766.184,145.194,280.153.26%-10.20%
Russell 20002,245.311,921.822,016.624.93%-10.19%
Global Dow4,137.633,625.723,741.513.19%-9.57%
Fed. Funds target rate0.00%-0.25%2.25%-2.50%2.25%-2.50%75 bps225 bps
10-year Treasuries1.51%2.84%2.84%0 bps133 bps
US Dollar-DXY95.64106.57105.68-0.84%10.50%
Crude Oil-CL=F$75.44$88.36$91.883.98%21.79%
Gold-GC=F$1,830.30$1,790.40$1,816.801.47%-0.74%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Inflation slowed more than expected as the Consumer Price Index was flat in July after increasing 1.3% in June. The CPI is up 8.5% since July 2021, down from 9.1% for the 12-month period ended in June. Gasoline prices fell 7.7% in July, offsetting price increases in food and shelter. Food prices rose 1.1% with food prices at home climbing 1.3%. Prices for shelter increased 0.5% and prices for medical care services rose 0.4%. Prices for new vehicles advanced 0.6%, while prices for used vehicles dropped 0.4%. Prices for apparel dipped 0.1%, and prices for transportation services decreased 0.5%. Prices for medical care commodities increased 0.6%.
  • The Producer Price Index for July fell 0.5% after advancing 1.0% in June. For the 12 months ended in July, producer prices are up 9.8%. Last month, prices for goods declined 1.8%, the largest decline since moving down 2.7% in April 2020. The July decrease can be traced to a 9.0% drop in prices for energy. On the other hand, prices for foods increased 1.0%. Prices for services rose 0.1%, the third consecutive monthly increase. Leading the July advance, margins for trade services rose 0.3% (trade indexes measure margins received by wholesalers and retailers).
  • Import prices slid 1.4% in July after advancing 0.3% in June. Export prices also declined in July, dropping 3.3% following a 0.7% increase in June. With only the personal consumption expenditures price index left to be released later this month, the other primary inflationary indicators have each shown waning inflationary price pressures in July. As to import prices, the July decline was the first monthly decrease since December 2021 and the largest drop since April 2020. Import prices rose 8.8% over the 12 months ended in July, the smallest year-over-year increase since the index advanced 7.1% for the 12 months ended in March 2021. Fuel import prices fell 7.5% last month. Import prices excluding fuel decreased for the third consecutive month after dipping 0.5% in July. The July decrease in export prices was the largest one-month decline since April 2020. Prices for exports rose 13.1% over the past year, the lowest 12-month advance since the index increased 9.6% for the 12 months ended in March 2021.
  • The Treasury deficit for July increased to $211.1 billion, up from the June deficit of $88.8 billion but lower than the $302.1 billion deficit in July 2021. Through the first 10 months of the fiscal year, the deficit sits at $732.5 billion. Over the same period last fiscal year, the deficit was $2.540 trillion.
  • The national average retail price for regular gasoline was $4.038 per gallon on August 8, $0.154 per gallon below the prior week’s price but $0.866 higher than a year ago. Also as of August 8, the East Coast price decreased $0.127 to $3.967 per gallon; the Gulf Coast price fell $0.158 to $3.535 per gallon; the Midwest price dropped $0.185 to $3.851 per gallon; the West Coast price slid $0.160 to $4.999 per gallon; and the Rocky Mountain price fell $0.158 to $4.353 per gallon. Residential heating oil prices averaged $3.216 per gallon on August 5, about $0.409 per gallon less than the prior week’s price. According to the U.S. Energy Information Administration, gasoline production increased during the week of August 5, averaging 10.2 million barrels per day. Also, U.S. crude oil imports averaged 6.2 million barrels per day, a decrease of 1.2 million barrels per day from the previous week.
  • For the week ended August 6, there were 262,000 new claims for unemployment insurance, an increase of 14,000 from the previous week’s level, which was revised down by 12,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 30 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 30 was 1,428,000, an increase of 8,000 from the previous week’s level, which was revised up by 4,000. States and territories with the highest insured unemployment rates for the week ended July 23 were Connecticut (2.3%), New Jersey (2.1%), Puerto Rico (2.0%), California (1.9%), Rhode Island (1.8%), Massachusetts (1.7%), New York (1.6%), Pennsylvania (1.5%), Alaska (1.2%), Illinois (1.2%), and Nevada (1.2%). The largest increases in initial claims for the week ended July 30 were in Connecticut (+4,790), Oklahoma (+997), North Carolina (+547), Washington (+372), and Nevada (+177), while the largest decreases were in Massachusetts (-14,256), Kentucky (-2,201), Ohio (-1,640), Michigan (-1,425), and Illinois (-1,033).

Eye on the Week Ahead

Housing data for July is out this week. Rising mortgage rates and overall inflationary pressure have subdued the housing sector. Housing starts for new home construction were down 6.3% from June 2021, with starts for single family homes down 15.7%. Sales of existing homes have fallen, down 14.2% over the last 12 months. The Federal Reserve’s industrial production report for July is also available this week. Overall production fell 0.2% in June, with manufacturing down 0.5%.

What I’m Watching This Week – 8 August 2022

The Markets (as of market close August 5, 2022)

Stocks closed last week generally higher. A surprisingly strong labor report for July helped alleviate recession fears, but opened the door to more interest-rate hikes from the Federal Reserve as it continues to slow inflation. The S&P 500 and the Nasdaq finished higher for the third straight week, the longest weekly rally since April. The Russell 2000 also enjoyed a solid week. The Dow and the Global Dow dipped lower. The apparent strength of the labor sector seemingly lends credence to the Fed’s premise that the economy is resilient enough to withstand larger interest-rate increases. A 75-basis point rate increase is now more likely when the Fed meets next in September. More rate hikes may pose a challenge for interest-sensitive stocks, like tech shares. Nevertheless, recent strong corporate earnings reports, coupled with strength in the labor sector, should bolster economic sentiment. Last week, crude oil prices posted the largest weekly loss since April after decreasing nearly $10.00 per barrel. Signs of a global economic slowdown has curbed demand, sending prices to their lowest level in six months. Falling crude oil prices are helping drive gasoline prices lower, with several states now posting average regular gasoline prices below $4.00 per gallon.

Last Monday saw stocks dip lower, unable to maintain a three-day rally. Wall Street enjoyed a strong July, partly on the speculation that the Federal Reserve would scale back its program of interest-rate increases. However, some Fed officials hinted that the central bank will need to raise rates further to bring inflation under control. Of the benchmark indexes listed here, only the Global Dow advanced, gaining 0.3%. The S&P 500 slid 0.3%, followed by the Nasdaq, which lost 0.2%. The Dow and the Russell 2000 fell 0.1%. Ten-year Treasury yields also fell, dropping 3.6 basis points to close last Monday at 2.60%. Weak demand sent crude oil prices down $4.70 to end the day at about $93.92 per barrel. The dollar fell, while gold prices advanced.

Stocks closed lower last Tuesday, while long-term Treasury yields climbed higher. Investors retreated from stocks following more rhetoric from Federal Reserve officials indicating that they’re “nowhere near” done with efforts to tamp down on inflation, coupled with China’s response to House Speaker Nancy Pelosi’s visit to Taiwan. Among the benchmark indexes listed here, the Global Dow (-1.3%) and the Dow (-1.2%) dipped the furthest, followed by the S&P 500 (-0.7%), the Nasdaq (-0.2%), and the Russell 2000 (-0.1%). Ten-year Treasury yields spiked 13.5 basis points to hit 2.74% by the close of trading. The dollar and crude oil prices edged higher, while gold prices fell.

Wall Street surged higher last Wednesday, reversing course from the previous couple of days. The Nasdaq gained 2.6%, ending at a three-month high. Strong profit forecasts from some major companies helped lift investors’ spirits. The S&P 500 and the Russell 2000 climbed 1.5%, the Dow rose 1.3%, and the Global Dow added 0.5%. Yields on 10-year Treasuries ended the day where they began. Crude oil prices fell $3.57 to $90.85 per barrel. The dollar increased marginally, while gold prices slid lower.

Stocks ended last Thursday mixed as investors awaited Friday’s jobs report. The Nasdaq (0.4%) and the Global Dow (0.2%) gained ground, while the Dow (-0.3%), the S&P 500 (-0.1%), and the Russell 2000 (-0.1%) slid lower. Bond prices advanced, pulling yields lower. Ten-year Treasury yields lost 7.2 basis points to close at 2.67%. Crude oil prices fell below $90.00 per barrel for the first time since February, which should help drive prices at the pump lower. The dollar dipped lower. Gold prices reversed a negative trend, gaining $33.20 to reach $1,809.60 per ounce. Last Friday saw Wall Street end the day with mixed returns. The Russell 2000 (0.8%), the Dow (0.2%), and the Global Dow (0.1%) posted gains, while the Nasdaq (-0.5%) and the S&P 500 (-0.2%) fell. Bond prices declined, sending yields higher. The yield on 10-year Treasuries gained 16.4 basis points to reach 2.84%. Crude oil prices continued to fall, hitting $88.36 per barrel. The dollar rose, while gold prices sank.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 8/5Weekly ChangeYTD Change
DJIA36,338.3032,845.1332,803.47-0.13%-9.73%
Nasdaq15,644.9712,390.6912,657.552.15%-19.10%
S&P 5004,766.184,130.294,145.190.36%-13.03%
Russell 20002,245.311,885.731,921.821.91%-14.41%
Global Dow4,137.633,639.483,625.72-0.38%-12.37%
Fed. Funds target rate0.00%-0.25%2.25%-2.50%2.25%-2.50%75 bps225 bps
10-year Treasuries1.51%2.64%2.84%20 bps133 bps
US Dollar-DXY95.64105.83106.570.70%11.43%
Crude Oil-CL=F$75.44$98.23$88.36-10.05%17.13%
Gold-GC=F$1,830.30$1,778.80$1,790.400.65%-2.18%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • July’s labor data showed strength in that sector. There were 528,000 new jobs added, well above the 398,000 added in June and larger than the average monthly gain over the prior four months (388,000). Last month, the unemployment rate dipped 0.1 percentage point to 3.5%, and the total number of unemployed persons decreased 242,000 to 5.7 million. In July, job growth occurred in several areas, led by leisure and hospitality, professional and business services, and health care. Among the unemployed, the number of persons who permanently lost jobs, at 1.2 million in July, continued to trend down over the month and is 129,000 lower than in February 2020 prior to the pandemic. Last month, 2.2 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. In July, the labor force participation rate, at 62.1%, and the employment-population ratio, at 60.0%, were little changed over the month. In July, 7.1% of employed persons teleworked because of the pandemic, unchanged from the prior month. In July, average hourly earnings rose by $0.15, or 0.5%, to $32.27. Over the past 12 months, average hourly earnings have increased by 5.2%. In July, the average work week was 34.6 hours, unchanged for the fifth month in a row.
  • According to the survey of purchasing managers, manufacturing further weakened in July. The S&P Global US Manufacturing Purchasing Managers’ Index™ posted 52.2 in July, down from 52.7 in June. Contributing to the drop in manufacturing was the first decline in output since June 2020. Demand weakened as new orders fell at the fastest pace in over two years. Input costs paid by manufacturers rose in July, but at a slower pace than in previous months. The increase in manufacturers’ costs was largely attributable to greater transportation, fuel, and raw material prices. Firms generally passed higher costs to consumers, as output charges rose at an historically elevated pace.
  • Business activity in the services sector decreased in July, the first decline since June 2020. The S&P Global US Services PMI Business Activity Index registered 47.3 in July, down from 52.7 in June, marking the fourth successive decline in the services index. Survey respondents reported a contraction in output that was linked to subdued demand, worsening financial conditions, and higher prices.
  • According to the latest Job Openings and Labor Turnover report for June, the number of job openings fell 605,000 to 10.7 million. The largest decreases in job openings were in retail trade (-343,000), wholesale trade (-82,000), and state and local government education (-62,000). In June, the number of hires was little changed at 6.4 million. Also in June, total separations, which include quits, layoffs, and discharges, were little changed at 5.9 million. Quits, which are a measure of workers’ willingness or ability to leave jobs, were 4.2 million, little changed from the previous month.
  • The international trade in goods and services trade deficit decreased in June for the third consecutive month. The trade deficit was $79.6 billion in June, down 6.2% from the May deficit. In June, exports increased 1.7%, while imports decreased 0.3%. Year to date, the goods and services deficit increased $134.1 billion, or 33.4%, from the same period in 2021. Over that same period, exports increased 20.0% and imports rose 23.3%.
  • The national average retail price for regular gasoline was $4.192 per gallon on August 1, $0.138 per gallon below the prior week’s price but $1.033 higher than a year ago. Also as of August 1, the East Coast price decreased $0.112 to $4.094 per gallon; the Gulf Coast price fell $0.138 to $3.693 per gallon; the Midwest price dropped $0.191 to $4.036 per gallon; the West Coast price slid $0.107 to $5.159 per gallon; and the Rocky Mountain price fell $0.145 to $4.511 per gallon. Residential heating oil prices averaged $3.625 per gallon on July 29, about $0.169 per gallon more than the prior week’s price. According to the U.S. Energy Information Administration, the breakdown of what we pay for a gallon of regular gasoline is as follows: 10% for taxes, 8% for distribution and marketing, 27% for refining, and 55% for crude oil.
  • For the week ended July 30, there were 260,000 new claims for unemployment insurance, an increase of 6,000 from the previous week’s level, which was revised down by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 23 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 23 was 1,416,000, an increase of 48,000 from the previous week’s level which was revised up by 9,000. States and territories with the highest insured unemployment rates for the week ended July 16 were Puerto Rico (2.2%), New Jersey (2.1%), California (1.9%), Connecticut (1.9%), Rhode Island (1.8%), New York (1.6%), Massachusetts (1.5%), Pennsylvania (1.5%), Alaska (1.2%), Illinois (1.2%), and Nevada (1.2%). The largest increases in initial claims for the week ended July 23 were in Kentucky (+1,051), Virginia (+283), New Mexico (+51), the Virgin Islands (+21), and South Dakota (+7), while the largest decreases were in Massachusetts (-7,490), New York (-5,769), South Carolina (-3,170), California (-3,122), and Alabama (-2,125).

Eye on the Week Ahead

The latest inflation data is front and center this week with the releases of the July Consumer Price Index, the Producer Price Index, and import and export prices. Over the past 12 months ended in June, the CPI is up 9.1%, the PPI has advanced 11.3%, import prices have risen 10.7%, and export prices are up 18.2%.

Monthly Market Review – July 2022

The Markets (as of market close July 29, 2022)

July saw the stock market ebb and flow throughout the month. Sometimes the market reacted in response to news of some sort. Other times, stocks moved in anticipation of something that may happen. For instance, the latest quarterly corporate earnings reports generally have been better than expected, with about 75% of the S&P 500 companies beating analysts’ estimates. However, investors responded negatively following reports that a major retailer was slashing its profit outlook. On the other hand, traders moved to equities following a strong labor report early in the month. The latest Consumer Price Index rose higher than expected, indicating inflation was not close to retreating. Following that report, investors retreated from equities, anticipating that the Federal Reserve would accelerate its tightening policy and raise interest rates more than 75 basis points. In fact, at the end of the month, the Fed bumped up interest rates 75 basis points, as expected. Interestingly, the market jumped higher after the latest interest-rate hike. Investors replaced anticipation of an acceleration in rate increases with expectations that the Fed may not need to be as aggressive as some had feared. Nevertheless, rising inflation, which has led to multiple interest rate hikes, supply bottlenecks, decelerating gross domestic product, the emergence of new COVID strains, and the ongoing Russia/Ukraine war promoted fears of an economic recession. Yet, there is enough favorable economic data to offer some hope.

Inflation continued to dominate the economic news throughout the month. Not only did the CPI advance more than expected, but the personal consumption expenditures index (a preferred inflation indicator of the Federal Reserve) hit a 40-year high. The real estate sector continued to slow in July after setting a torrid pace in 2021 and early in 2022. However, the labor market showed strength, adding nearly 400,000 new jobs, while wages have increased more than 5.0% over the past 12 months. After raising the federal funds rate late in the month, Federal Reserve Chair Jerome Powell hinted that the pace of interest-rate hikes may eventually slow to assess the cumulative impact on the economy. Gross domestic product decelerated for the second straight quarter, for the three-month period ended in June. Industrial production also slowed in June, with manufacturing output falling for the second consecutive month.

Crude oil prices declined for the second consecutive month in July, something that hasn’t happened since 2020. Rising inflation has cut into consumer spending, weakening demand. Crude oil prices advanced over 10.0% to nearly $115.00 per barrel. Gas prices also continued to fall in July after reaching record highs in May and June. The national average retail price for regular gasoline was $4.330 per gallon on July 25, down from $4.872 on June 27 but $1.194 over a year ago.

Overall, stocks enjoyed the strongest month since 2020. The S&P 500 had its best month since November 2020, while the Nasdaq’s monthly performance was the best since April 2020. Investors saw strong corporate earnings reports as a positive sign for stocks, an indication that the economy may have some strength in it. Consumer discretionary, technology, and industrials led the market sectors. Ten-year Treasury yields ended the month down 33.0 basis points. Gold prices decreased nearly $30.00. The U.S. dollar road the ebbs and flows of the stock market and bond prices, ultimately ending the month higher than it started.

Stock Market Indexes

Market/Index2021 ClosePrior MonthAs of July 29Monthly ChangeYTD Change
DJIA36,338.3030,775.4332,845.136.73%-9.61%
Nasdaq15,644.9711,028.7412,390.6912.35%-20.80%
S&P 5004,766.183,785.384,130.299.11%-13.34%
Russell 20002,245.311,707.991,885.7310.41%-16.01%
Global Dow4,137.633,507.373,639.483.77%-12.04%
Fed. Funds target rate0.00%-0.25%1.50%-1.75%2.25%-2.50%75 bps225 bps
10-year Treasuries1.51%2.97%2.64%-33 bps113 bps
US Dollar-DXY95.64104.70105.831.08%10.65%
Crude Oil-CL=F$75.44$105.82$98.23-7.17%30.21%
Gold-GC=F$1,830.30$1,808.00$1,778.80-1.62%-2.81%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.

Latest Economic Reports

  • Employment: Employment rose by 372,000 in June, in line with the prior three-month average (383,000). Notable job gains occurred in professional and business services, leisure and hospitality, and health care. With the June increase, employment is down by only 524,000, or 0.3%, from its pre-pandemic level in February 2020. The unemployment rate remained at 3.6% for the fourth month in a row. The number of unemployed persons dipped marginally to 5.9 million. By comparison, in February 2020 prior to the coronavirus pandemic, the unemployment rate was 3.5%, and the number of unemployed persons increased by about 200,000 to 5.9 million. Among the unemployed, the number of workers who permanently lost their jobs was 1.3 million in June (1.4 million in May). The number of persons who were unable to work because their employer closed or lost business due to the pandemic rose to 2.1 million, up from 1.8 million in May. The labor force participation rate was little changed at 62.2% in June. The employment-population ratio fell by 0.3 percentage point to 59.9%. Both measures remain below their February 2020 values (63.4% and 61.2%, respectively).In June, average hourly earnings rose by $0.10 to $32.08. Over the last 12 months ended in June, average hourly earnings increased by 5.1%. The average work week was 34.5 hours in June, down 0.1 percentage point from the previous month.
  • There were 256,000 initial claims for unemployment insurance for the week ended July 23 (231,000 on June 25), while the total number of insured unemployment claims was 1,359,000 as of July 16 (1,372,000 on June 25). A year ago, there were 411,000 initial claims for unemployment insurance and 3,082,000 total insured unemployment claims.
  • FOMC/interest rates: Following its meeting in July, the Federal Open Market Committee increased the federal funds target rate range by 75.0 basis points to 2.25%-2.50%. In support of its decision, the Committee noted that it is “highly attentive to inflation risks” and that it is “strongly committed to returning inflation to its 2.0% objective.”
  • GDP/budget: Gross domestic product decreased 0.9% in the second quarter of 2022 after falling 1.6% in the first quarter. The economy has decelerated for two months in a row. A portion of the second-quarter downturn is attributable to sectors impacted by higher interest rates that are cutting into demand (e.g., housing, nonresidential fixed investment), while inflation and ongoing supply chain disruptions are impacting production. Consumer spending rose 1.0% in the second quarter after increasing 1.8% in the first quarter. Most of the increase in consumer spending is attributable to a 4.1% jump in services, while spending on durables slid 2.6%. Also dragging down GDP was a 3.9% decline in fixed investment, within which residential fixed investment dropped 14.0%, evidence of the slowdown in the housing sector. Nonresidential (business) fixed investment dipped 0.1% after rising 10.0% in the previous quarter. Exports rose 18.0% in the second quarter, while imports, which are a negative in the calculation of GDP, advanced 3.1% after jumping 18.9% in the first quarter. In the second quarter, the personal consumption expenditures price index, a measure of inflation, increased 7.1%, the same increase as in the first quarter.
  • The Treasury budget deficit came in at $88.8 billion in June, up from $66.2 in May but down from the deficit of $174.2 billion in June 2021. Through the first nine months of fiscal year 2022, the deficit sits at $515.1 billion, $1,722.9 billion lower than the deficit over the same period in fiscal year 2021, as outlays dropped $943.6 billion while receipts increased $779.3 billion. So far in this fiscal year, individual income tax receipts have risen 34.3% and corporate income tax receipts have increased 15.4%.
  • Inflation/consumer spending: Overall, inflationary pressures continued to advance in June. According to the latest Personal Income and Outlays report, the personal consumption expenditures price index, a measure of inflation favored by the Federal Reserve, climbed 1.0% in June after advancing 0.6% in May. Consumer prices have risen 6.8% since June 2021. Personal income increased 0.6% in June, the same increase as in the previous month. Disposable personal income rose 0.7% in June (0.6% in May). Consumer spending jumped 1.1% in June following a 0.3% increase in May.
  • The Consumer Price Index climbed 1.3% in June after climbing 1.0% in the previous month. The June increase was broad-based, with advances in prices for shelter, gasoline, and food being the largest contributors. The energy index rose 7.5% in June, with prices for gasoline climbing 11.2%. Prices for food rose 1.3% in June (1.0% in May), and the index for shelter increased 0.6% for the second consecutive month. New vehicle prices rose 0.6% in June, while used-vehicle prices jumped 1.6% higher. Apparel increased 0.8% in June and transportation services increased 2.1%. For the 12 months ended in June, the CPI increased 9.1% (8.6% for the 12-month period ended in May), the largest 12-month increase since the period ending November 1981.
  • Prices that producers receive for goods and services jumped 1.1% in June following a 0.8% increase in May. Producer prices have increased 11.3% since June 2021. Prices less foods, energy, and trade services increased 0.4% in June and 8.2% since June 2021, the largest 12-month increase since March 2022. In June, nearly three-fourths of the rise in the PPI was due to a 2.4% advance in prices for final demand goods. Prices for final demand services increased 0.4%. A major factor in the June increase in the prices for goods was a 10.0% increase in energy prices, within which gasoline prices spiked 18.5%.
  • Housing: Sales of existing homes retreated for the fifth consecutive month in June, falling 5.4% from the May estimate. Year over year, existing home sales were 14.2% under the June 2021 total. According to the latest survey from the National Association of Realtors®, mortgage rates and home prices have risen sharply over a short span of time, taking a toll on potential home buyers. The median existing-home price was $416,000 in June, up from $408,400 in May and 13.4% higher than June 2021 ($366,900). Unsold inventory of existing homes represents a 3.0-month supply at the current sales pace, up from a 2.6-month supply in May. Sales of existing single-family homes also fell, down 4.8% in June. Sales of existing single-family homes have fallen 12.8% since June 2021. The median existing single-family home price was $423,300 414,200 in June, up from $415,400 in May and 13.3% over the June 2021 price.
  • Sales of new single-family homes also declined in June, falling 8.1% from May’s total and 17.4% from June 2021. The median sales price of new single-family houses sold in June was $402,400 ($444,500 in May). The June average sales price was $456,800 ($514,000 in May). The inventory of new single-family homes for sale in June represented a supply of 9.3 months at the current sales pace, up from May’s 8.4-month supply. Sales of new single-family homes in June were 17.4% below the June 2021 estimate.
  • Manufacturing: Industrial production decreased 0.2% in June. Industrial production was flat in May. In June, manufacturing output declined for a second consecutive month, falling 0.5%. Manufacturing of durable goods is down 0.3% in June including a 1.5% decline in motor vehicles and parts. Manufacturing of nondurable goods is off 0.8%, with broad-based declines across most categories except apparel and leather which increased 2.5%. In June, the index for mining rose 1.7%, while the index for utilities fell 1.4%. Despite the June decline, total industrial production was 4.2% higher than it was a year earlier. Since June 2021, manufacturing has risen 3.6%, mining has jumped 8.2%, while utilities have increased 1.4%.
  • June saw new orders for durable goods increase $5.0 billion, or 1.9%, marking the eighth monthly increase out of the last nine months. Excluding transportation, new orders rose 0.3% in June. Excluding defense, new orders increased 0.4%. Transportation equipment, up for three consecutive months, led the increase, up $4.5 billion, or 5.1%.
  • Imports and exports: Import prices rose 0.2% in June after advancing 0.5% in May, according to the U.S. Bureau of Labor Statistics. Higher fuel prices offset lower nonfuel prices to account for the overall June increase. Fuel import prices rose 5.7% in June, with higher petroleum and natural gas prices both contributing to the increase. The price index for import fuel rose 73.9% over the past year, the largest 12-month advance since increasing 87.0% in November 2021. Prices for nonfuel imports declined for the second consecutive month, dipping 0.5% in June, the largest one-month decrease since April 2020. Prices for U.S. exports advanced 0.7% in June following a 2.9% rise the previous month. Higher prices for nonagricultural exports more than offset lower agricultural export prices. Export prices have risen 18.2% since June 2021.
  • The international trade in goods deficit was $98.2 billion in June, down $5.9 billion, or 5.6%, from May. Exports of goods were $181.5 billion in June, $4.4 billion more than in May. Imports of goods were $279.7 billion, $1.5 billion less than May imports.
  • The latest information on international trade in goods and services, released July 7, is for May and shows that the goods and services trade deficit declined by $1.1 billion to $86.7 billion from the April deficit. May exports were $255.9 billion, $3.0 billion more than April exports. May imports were $341.4 billion, $1.9 billion higher than April imports. Year over year, the goods and services deficit increased $125.6 billion, or 38.4%, from the same period in 2021. Exports increased $197.1 billion, or 19.4%. Imports increased $323.6 billion, or 24.0%.
  • International markets: China’s gross domestic product contracted 2.6% in the second quarter after advancing 1.4% in the first quarter. The second-quarter decrease largely reflects the impact of public health restrictions implemented by the government in response to growing COVID cases. As health restrictions eased, economic indicators have shown some improvement recently. Nevertheless, the Chinese government does not appear to be overly concerned about the economic slowdown. On the other hand, economic growth in the eurozone accelerated, despite the ongoing Russia/Ukraine war. The combined GDP of eurozone members was 0.7% higher in the second quarter compared to the first quarter, largely attributable to lifting of pandemic restrictions put in place in the early part of the year. Overall, for the markets in July, the STOXX Europe 600 Index advanced 7.3%. The United Kingdom’s FTSE rose 3.2%. Japan’s Nikkei 225 Index jumped 7.2%, while China’s Shanghai Composite Index fell nearly 4.0%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® decreased for a third consecutive month in July following a larger decline in June. The July index dipped 2.7 points to 95.7. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, declined to 141.3 in July, down from 147.2 in June. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, declined to 65.3 in July (65.8 in June).

Eye on the Month Ahead

In August, investors will be looking for some clues as to the state of the economy, particularly in the aftermath of the Federal Reserve’s interest-rate hikes (the FOMC does not meet in August). The employment sector has shown some evidence of slowing, with a downturn in new hires and an increase in unemployment claims. The housing sector has also retreated from its torrid pace set earlier in the year. Nevertheless, economic indicators haven’t shown an obvious curtailment in the pace of inflation.