Month: July 2022

The Markets (as of market close July 15, 2022)

Despite a late-week rally, stocks ended last week lower. A strong retail sales report for June showed continued economic strength, even in the face of rising inflation and concerns over an economic recession. Investors still aren’t totally sold on risk, however. Each of the benchmark indexes listed here ended last week lower, led by the Global Dow, which fell more than 2.0%. Year to date, the Nasdaq is nearing a 30.0% downturn from its value at the end of 2021. Crude oil prices fell by nearly $7.00 to end the week below $100 per barrel. The dollar continued to rise, while gold prices faltered. Fed rate hikes and fears of a recession have sent the dollar to the highest level since March 2020.

Monday saw stocks slump, as trading volume was at its lowest pace in 2022. Tech shares led the sell-off, pulling the Nasdaq down 2.3%. The Russell 2000 also dipped a little more than 2.00%, followed by the Global Dow and the S&P 500, which slid 1.2%. The Dow lost 0.5%. Ten-year Treasury yields tumbled 11.0 basis points to close at 2.99%. Crude oil prices dropped $1.20 to sit at $103.50 per barrel. The dollar advanced, while gold prices declined. Traders may have pulled back from stocks as they awaited inflation data with the release of the June Consumer Price Index on Wednesday.

Stocks tumbled lower for the second consecutive day last Tuesday. Once again, the Nasdaq led the downturn, giving back 1.0%, followed by the S&P 500 (-0.9%), the Dow (-0.6%), the Global Dow (-0.4%), and the Russell 2000 (-0.2%). The yield on 10-year Treasuries dipped lower last Tuesday and is about 12.0 basis points below the two-year rate. This so-called “inversion curve” is often a sign of a contracting economy. Crude oil prices fell $8.40 to hit $95.68 per barrel. The dollar rose against a basket of currencies, while gold prices lagged.

Wall Street saw equities slide last Wednesday as investors retreated from risk following a greater-than-expected jump in the latest Consumer Price Index. Both the Dow and the Global Dow fell 0.7%, while the S&P 500 dropped 0.5%. The Nasdaq dipped 0.2%, while the Russell 2000 broke even on the day. Ten-year Treasury yields fell 5.4 basis points, settling at 2.90%, while the two-year rate rose to 3.14%, deepening the “inversion” of the yield curve. Crude oil prices and the dollar were relatively unchanged, while gold prices reversed course, gaining $6.30 to reach $1,731.10 per ounce.

Last Thursday, traders spent most of the day retreating from stocks, worried that recent inflation data would prompt a 100-basis point rate hike at the end of the month. However, Wall Street recovered somewhat after Federal Reserve officials seemed to quel those concerns. Nevertheless, the Global Dow (-1.6%), the Russell 2000 (-1.1%), the Dow (-0.5%), and the S&P 500 (-0.3%) still ended the day in the red. The Nasdaq ended the day flat. Crude oil prices and the dollar advanced marginally, while gold prices slid lower. The yield on 10-year Treasuries climbed to 2.96%, up 5.6 basis points. Two-year Treasury yields dipped lower, but not enough to make a dent in the inverted yield curve. Disappointing quarterly results from some major financial firms pulled the financial sector lower and added to the concern that an economic downturn is coming.

Stocks rallied last Friday to end a topsy-turvy week of trading. It’s possible that some investors were buoyed by a solid retail sales report, while other traders may have been taking advantage of some possible low-hanging bargains. In any case, each of the benchmark indexes listed here posted solid gains, led by the Russell 2000 and the Dow, which advanced 2.2%. The S&P 500 climbed 1.9%, the Nasdaq added 1.8%, and the Global Dow gained 1.7%. Long-term bond prices advanced, dragging the yield on 10-year Treasuries down marginally to 2.93%. Crude oil prices rose to $97.66 per barrel. The dollar and gold prices dipped lower.

Stock Market Indexes

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 Consumer Price Index rose 1.3% in June and is up 9.1% over the past 12 months. This is the largest 12-month increase in the CPI since 1981. Both the monthly and 12-month rates were greater than expected and will almost certainly prompt the Federal Reserve to raise interest rates by at least 75.0 basis points following its next meeting at the end of July. The June increase was broad-based, with gasoline, shelter, and food being the largest contributors. The energy index rose 7.5% and contributed nearly half of the overall increase, with the gasoline index rising 11.2%. The food index rose 1.0% in June, while the shelter index increased 0.6%. Since June 2021, the food index has risen 10.4%, the energy index has advanced 41.6% (gasoline is up 59.9% and fuel oil has risen 98.5%), and prices for shelter have increased 5.6%.
• Producer prices climbed higher in June. The Producer Price Index advanced 1.1% last month after increasing 0.9% in May. Over the past 12 months, the PPI has risen 11.3%, the largest increase since a record 11.6% increase in March 2022. In June, prices for goods rose 2.4%, while prices for services increased 0.4%. A 10.0% increase in energy prices accounted for 90% of the increase in prices for goods. Prices for goods less foods and energy advanced 0.5%. Gasoline prices jumped 18.5% in June, while prices for foods ticked up 0.1%.
• Sales of food services and retail items rose 1.0% in June over the previous month. Retail and food services sales are up 8.4% since June 2021. In many cases, the increase in June retail sales is attributable to higher prices and not necessarily greater demand. Excluding gasoline sales, retail sales rose 0.7% in June. Sales from gasoline stations increased 3.6% in June and were up 49.1% from June 2021, while food services and drinking places sales advanced 1.0% last month and 13.4% from last year. On the other hand, department store sales dropped 2.6% in June, while clothing and clothing accessories sales dipped 0.4%. Retail trade sales were up 1.0% from May and have increased 7.7% over the last 12 months.
• Prices for imports rose 0.2% in June over May. Export prices rose 0.7% last month. Import prices have risen 10.7% over the last 12 months, while export prices increased 18.2%. Import fuel prices rose 5.7% last month and 73.9% for the year ended in June, which is the largest 12-month increase since November 2021. Excluding fuel, import prices declined for the second consecutive month, decreasing 0.5% in June. The June decline in nonfuel imports was the largest one-month decrease since April 2020. In June, lower prices for nonfuel industrial supplies and materials; consumer goods; and foods, feeds, and beverages more than offset higher capital goods prices. On the other side of the ledger, agricultural export prices dipped 0.3% in June, falling for the first time since September 2021. Nonagricultural export prices increased 0.9% last month and have not decreased since December 2021.
• The monthly Treasury statement for June showed a budget deficit of $88.8 billion, up from May’s $66.2 billion but well below the June 2021 deficit of $174.2 billion. Through the first nine months of the fiscal year, the government budget deficit sits at $515.1 billion, nearly $1.8 billion less than the deficit over the same period in the previous fiscal year. Individual income taxes are up $544.8 billion in the current fiscal year, while corporate income taxes are up $40.9 billion.
• In June, total industrial production fell 0.2% and has not increased since April 2022. Manufacturing output declined 0.5% for the second consecutive month in June. Mining rose 1.7%, although utilities fell 1.4%. Despite the downturn, total industrial production was 4.2% above its level in June 2021. The June decrease in production was widespread, with durable and nondurable consumer good falling 1.0% and 0.7%, respectively. Last month, the appliance, furniture, and carpeting category posted the largest loss among the components of consumer goods (-3.3%), while only home electronics, miscellaneous goods, and clothing recorded gains.
• The national average retail price for regular gasoline was $4.646 per gallon on July 11, $0.125 per gallon below the prior week’s price but $1.513 higher than a year ago. Also as of July 11, the East Coast price decreased $0.119 to $4.472 per gallon; the Gulf Coast price fell $0.161 to $4.190 per gallon; the Midwest price dropped $0.130 to $4.599 per gallon; the West Coast price slid $0.123 to $5.571 per gallon; and the Rocky Mountain price fell $0.054 to $4.947 per gallon. Residential heating oil prices averaged $3.673 per gallon on July 8, about $0.266 per gallon less than the prior week’s price. According to the U.S. Energy Information Administration report of July 13, gasoline production decreased, averaging 5.1 million barrels per day. Refineries operated at 94.9% of their capacity. 53 U.S. exploration and production (E&P) companies reported higher revenue in the first quarter of 2022, passing some of those profits on to shareholders in the form of dividends. In addition, as crude oil prices and returns on investment rise, the valuation of these companies has increased to just below the previous five-year high.
• For the week ended July 9, there were 244,000 new claims for unemployment insurance, an increase of 9,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 2 was 0.9%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 2 was 1,331,000, a decrease of 41,000 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 June 25 were New Jersey (2.0%), Puerto Rico (1.9%), California (1.9%), Rhode Island (1.6%), Pennsylvania (1.5%), Massachusetts (1.4%), New York (1.4%), Alaska (1.3%), and Georgia (1.3%). The largest increases in initial claims for the week ended July 2 were in New York (+5,165), Michigan (+5,104), Georgia (+2,935), California (+2,823), and Mississippi (+1,364), while the largest decreases were in Illinois (-1,508), Kentucky (-1,232), Missouri (-1,061), Ohio (-998), and Pennsylvania (-971).

Eye on the Week Ahead

The latest data on the housing market for June is out this week with reports on housing starts and existing home sales. The housing market has definitely slowed in 2022 after setting a torrid pace the previous year. In May, residential building permits and housing starts fell, while sales of existing homes dipped for the fourth consecutive month.

The Markets (as of market close July 8, 2022)

Last Friday’s strong jobs report may have alleviated fears of a recession for the time being, but it also likely supported a more aggressive response from the Federal Reserve as it tries to dampen rising inflation. Stocks started July on a strong note, with each of the benchmark indexes listed here posting solid gains. The tech-heavy Nasdaq, which has been hit hard during the first half of the year, gained over 4.5%, although it remains more than 25.0% below its 2021 year-end value. The small caps of the Russell 2000, down more than 21.0% from the beginning of the year, jumped nearly 2.5% higher last week. Wall Street is likely to see volatility continue until investors see signs that the Fed is backing off its current path of rate increases. With corporate earnings season right around the corner, traders will focus on company forecasts as well as inflation data to assess the health of the economy.

Stocks began the holiday-shortened week generally higher last Tuesday, with the Nasdaq gaining 1.8%. Treasury prices rallied, sending yields lower, despite talks of easing trade sanctions against China, as worries of an economic recession persisted among investors. The Russell 2000 gained 0.8%, while the S&P 500 eked out a 0.2% advance. The Global Dow (-1.8%) and the Dow (-0.4%) dipped lower. Ten-year Treasury yields slid 8 basis points, falling to 2.80%. Crude oil prices posted their largest decline since March, dropping to just below $100 per barrel. On the other hand, the dollar jumped higher against a basket of currencies.

Last Wednesday saw equities close generally higher for the third consecutive session. The Nasdaq and the S&P 500 each added 0.4%, while the Dow gained 0.2%. The small caps of the Russell 2000 (-0.8%) and the Global Dow (-0.4%) closed lower. Bond prices dipped lower, sending the yield on 10-year Treasuries up 10.4 basis points to reach 2.91% by the close of trading. Crude oil prices fell for a second straight day, falling $1.40 to end the day at $98.10 per barrel. The dollar advanced, while gold prices sank to $1.73 per ounce. Investors apparently weren’t influenced by last Wednesday’s economic data, which evidenced some softening. Job openings dipped in May, and growth in the services sector eased in June to a more than two-year low. Minutes from the Federal Reserve’s last meeting in June reflected a Fed that is very much concerned with inflation, to the point of talking about the potential for an even more restrictive policy over time.

Stocks gained for the fourth session in a row last Thursday. Investors may be banking on the Federal Reserve being able to curb inflation without sending the economy into a recession. The dollar dropped for the first time in five days as each of the benchmark indexes posted solid gains, led by the Russell 2000 (2.4%), closely followed by the Nasdaq (2.3%). The Global Dow (1.8%), the S&P 500 (1.5%), and the Dow (1.1%) also advanced. Ten-year Treasury yields ended the day at 3.00%, an increase of 9.5 basis points. Crude oil prices jumped $3.67 to $102.20 per barrel. Gold prices ended a downward trend after climbing $2.90 to reach $1,739.40 per ounce.

Friday closed the week for stocks with mixed results. The Nasdaq inched up 0.1% and the Global Dow rose 0.2%. The remaining benchmark indexes listed here slipped marginally lower. Ten-year Treasury yields gained 9.3 basis points to reach 3.10%. Crude oil prices continued to advance, climbing nearly $2.00 to sit at $104.69 per barrel. The dollar fell, while gold prices rose for the second consecutive day.

Stock Market Indexes

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

• Employment rose by a higher-than-expected 372,000 in June, with notable job growth occurring in professional and business services, leisure and hospitality, and health care. The unemployment rate was 3.6% for the fourth month in a row, and the number of unemployed persons was essentially unchanged at 5.9 million in June. These measures are little different from their values in February 2020 (3.5% and 5.7 million, respectively), prior to the coronavirus (COVID-19) pandemic. The labor force participation rate, at 62.2%, and the employment-population ratio, at 59.9%, were little changed over the month. Both measures remain below their February 2020 values (63.4% and 61.2%, respectively). In June, 2.1 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, up from 1.8 million in May. In June, average hourly earnings rose by $0.10, or 0.3%, to $32.08. Over the past 12 months, average hourly earnings have increased by 5.1%. The average work week was unchanged from the previous month at 34.5 hours in June.
• The services sector saw new orders decrease in June, with price pressures and economic uncertainty hitting demand. According to the latest report, the S&P Global US Services PMI Business Activity Index registered 52.7 in June, remaining above 50.0, thereby signaling an increase in business activity, albeit at a slower pace than in May when the PMI registered 53.4. Business confidence outlook for the year ahead dropped to a 21-month low. On a more positive note, employment continued to increase sharply.
• According to the latest Job Openings and Labor Turnover report, the number of job openings decreased in May to 11.3 million, a drop of about 427,000 from the April total. The largest decreases in job openings were in professional and business services (-325,000), durable goods manufacturing (-138,000), and nondurable goods manufacturing (-70,000). In May, the number of hires, at 6.5 million, and the number of total separations, at 6.0 million, were little changed from the prior month’s respective totals. Over the 12 months ended in May, hires totaled 78.4 million and separations totaled 72.0 million, yielding a net employment gain of 6.4 million.
• The international goods and services trade deficit for May was $85.5 billion, down $1.1 billion, or 1.3%, from the April deficit. According to the latest information from the Bureau of Economic Analysis, in May exports increased 1.2% and imports advanced 0.6%. Year to date, the goods and services deficit increased $126.5 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%.
• The national average retail price for regular gasoline was $4.77 per gallon on July 4, $0.101 per gallon below the prior week’s price but $1.649 higher than a year ago. Also as of July 4, the East Coast price decreased $0.10 to $4.59 per gallon; the Gulf Coast price fell $0.15 to $4.35 per gallon; the Midwest price dropped $0.09 to $4.73 per gallon; the West Coast price slid $0.09 to $5.69 per gallon; and the Rocky Mountain price rose $0.02 to $5.00 per gallon. Residential heating oil prices averaged $3.94 per gallon on July 1, about $0.42 per gallon less than the prior week’s price. According to the U.S. Energy Information Administration, gasoline consumption during the second quarter of 2022 and into the beginning of July remained lower than 2021 levels. Excluding the pandemic year of 2020, this would be the lowest second quarter of gasoline consumption since 2001. Although U.S. gasoline consumption has not completely returned to pre-pandemic levels, it generally increased from mid-2020 through the first quarter of 2022. April was the first month this trend reversed.
• For the week ended July 2, there were 235,000 new claims for unemployment insurance, an increase of 4,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 25 was 1.0%, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 25 was 1,375,000, an increase of 51,000 from the previous week’s level, which was revised down by 4,000. States and territories with the highest insured unemployment rates for the week ended June 18 were New Jersey (1.9%), Puerto Rico (1.9%), California (1.8%), Pennsylvania (1.5%), New York (1.4%), Alaska (1.3%), Rhode Island (1.3%), Connecticut (1.2%), Hawaii (1.2%), Illinois (1.2%), and Massachusetts (1.2%). The largest increases in initial claims for the week ended June 25 were in New Jersey (+5,569), Massachusetts (+3,217), Ohio (+2,588), Kentucky (+1,478), and Missouri (+1,375), while the largest decreases were in California (-2,504), Texas (-2,074), Michigan (-1,683), Pennsylvania (-1,628), and Georgia (-1,606).

Eye on the Week Ahead

This is a busy week for the release of important economic data. Most of the attention, however, will focus on the Consumer Price Index for June. May saw consumer prices jump unexpectedly higher at 1.0%. Consumer prices have risen 8.6% since June 2021. Several analysts suggest that the June CPI will come in lower than the May figure.

The Markets (as of market close July 1, 2022)

Despite an end-of-week surge, stocks closed last week lower. Recession fears resulted in traders moving to bonds, driving prices higher and yields lower. As another round of corporate earnings reports nears, investors are bracing for weaker results, which could dampen trader sentiment and send stocks tumbling lower. With last Friday marking the start of the second half of the year, stocks are likely to continue to ride the volatility train. By the end of last week, each of the indexes listed here slid lower, led by the tech-heavy Nasdaq. Ten-year Treasury yields fell 25 basis points. The dollar rose marginally. Gold prices dipped lower. Crude oil prices climbed higher.

Stocks kicked off last week on a down note as Wall Street was unable to maintain the prior week’s rally. The Nasdaq (-0.7%), the S&P 500 (-0.3%), and the Dow (-0.2%) underperformed, while the Russell 2000 (0.3%) and the Global Dow (0.5%) edged higher. Among the market sectors of the S&P 500, only energy, utilities, and health care advanced. Ten-year Treasury yields advanced nearly 7 basis points to close at 3.19%. Crude oil prices rose by more than $2.00 to reach $109.82 per barrel. The dollar and gold prices fell.

Equities continued to tumble last Tuesday, with each of the benchmark indexes listed here closing the day in the red. Megacaps and growth stocks lagged, giving back gains from the previous week. The Nasdaq fell 3.0%, followed by the S&P 500 (-2.0%), the Russell 2000 (-1.8%), the Dow (-1.6%), and the Global Dow (-0.5%). Traders may have reacted to the latest report on waning consumer confidence, with economic expectations hitting a nearly 10-year low. Crude oil prices advanced for the third day as prices jumped another $2.00 to reach $111.68 per barrel. Ten-year Treasury yields climbed marginally higher, while the dollar rose against a bucket of currencies.

Only the Dow was able to eke out a gain last Wednesday after another choppy day of trading. The Russell 2000 fell the furthest, dropping 1.1%, followed by the Global Dow, which lost 1.0%. The S&P 500 and the Nasdaq slid less than 0.1%. Bond prices jumped higher, sending yields lower. Ten-year Treasury yields declined 11.3 basis points to close at 3.09%. Crude oil prices fell for the first time in four days, dropping $2.44 to $109.32 per barrel. The dollar advanced for a second consecutive day. Although Federal Reserve Chair Jerome Powell said the U.S. is in “strong shape” and “well positioned to withstand tighter monetary policy,” first-quarter consumer spending expanded at its softest pace since the beginning of the pandemic, possibly indicating the economy isn’t on such strong footing.

June ended last Thursday with equities continuing to tumble lower. Fears of a recession on the heels of rising inflation swayed investors from risk. Megacaps, banks, retailers, metals and mining, and airlines lagged on the day. Once again, the Nasdaq led the losing benchmark indexes, dropping 1.3%, followed by the Global Dow (-1.2%), the S&P 500 (-0.9%), the Dow (-0.8%), and the Russell 2000 (-0.7%). Treasury yields shed 12 basis points, finishing the day at 2.97%. Crude oil prices inched higher, along with the dollar. Gold prices lagged marginally.

July started last Friday with Treasury prices surging driving yields lower. The yield on 10-year Treasuries lost 8.3 basis points to end the day at 2.88%. Each of the benchmark indexes listed here added value, led by the Russell 2000 (1.2%), followed by the S&P 500 and the Dow, which each gained 1.1%. The Nasdaq rose 0.9%, while the Global Dow advanced 0.3%. Crude oil prices jumped $2.63 to close at $108.39 per barrel amid supply outages in Libya and expected shutdowns in Norway. The dollar and gold prices also advanced on the day.

Stock Market Indexes

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

• First-quarter gross domestic product decelerated at an annual rate of 1.6%, according to the final estimate from the Bureau of Economic Analysis. In the fourth quarter of 2021, GDP increased 6.9%. The decrease in GDP reflected declines in exports, federal, state, and local government spending, and private inventory investment, while imports, which are a subtraction in the calculation of GDP, increased. Nonresidential fixed investment, personal consumption expenditures, and residential fixed investment increased. The increase in personal consumption expenditures, a main driver of overall GDP, increased 1.8% following a 2.5% increase in the previous quarter. Driving PCE higher was an increase in spending on services (led by housing and utilities) that was partly offset by a decrease in spending on goods. Within goods, widespread decreases in nondurable goods (led by groceries as well as gasoline and other energy goods) were largely offset by an increase in durable goods (led by motor vehicles and parts). The personal consumption expenditures price index, a measure of inflation, increased 7.1%. Excluding food and energy, consumer prices increased 5.2%.
• Consumer prices rose 0.6% in May and are up 6.3% over the past 12 months, according to the latest report from the Bureau of Economic Analysis. Personal income and disposable (after-tax) personal income increased 0.5% in May. Personal consumption expenditures rose 0.2% in May, a much smaller increase than in April (0.6%) and March (1.2%), likely indicative of a shift in household spending away from discretionary items as prices for necessities, such as food and energy, increased.
• New orders for long-lasting durable goods increased 0.7% in May, the seventh monthly increase out of the last eight months. The May increase was widespread. Materials that notably increased include primary metals (3.1%), machinery (1.1%), communications equipment (2.0%), defense aircraft and parts (8.1%), and transportation equipment (0.8%). New orders for nondefense capital goods in May increased 0.5%, while new orders for defense capital goods jumped 2.6%.
• According to the S&P Global US Manufacturing PMI™ report, the purchasing managers’ index dropped to its lowest level since July 2020 amid a near-stagnation of factory output and a fall in new orders. The PMI posted 52.7 in June, down from 57.0 in May. The June reading was the lowest in nearly two years. The decrease in sales was the first since May 2020, with domestic and foreign client demand falling. A reduction in new orders, combined with a sustained rise in employment, led to greater success clearing backlogs of work. While inflationary pressures remained historically elevated, increases in input costs and output charges eased to three-month lows.
• The international trade in goods deficit for May was $104.3 billion, down $2.4 billion, or 2.2%, from the April deficit. Exports of goods for May were $2.0 billion, or 1.2%, more than April exports. However, imports of goods for May were $0.4 billion, or -0.1%, less than April imports. Since May 2021, exports are up 22.0% and imports have risen 21.3%.
• The national average retail price for regular gasoline was $4.87 per gallon on June 27, $0.090 per gallon below the prior week’s price but $1.781 higher than a year ago. Also as of June 27, the East Coast price decreased $0.10 to $4.69 per gallon; the Gulf Coast price fell $0.11 to $4.50 per gallon; the Midwest price dropped $0.09 to $4.82 per gallon; the West Coast price slid $0.07 to $5.79 per gallon; and the Rocky Mountain price dipped $0.01 to $4.98 per gallon. Residential heating oil prices averaged $4.36 per gallon on June 24, about $0.02 per gallon more than the prior week’s price. According to the U.S. Energy Information Administration, gas demand currently sits at 8.93 million barrels per day, which is lower than last year’s rate of 9.11 million barrels per day at the end of June. On the other hand, total domestic gasoline stocks increased by 2.6 million barrels. These supply/demand dynamics and decreasing oil prices have pushed pump prices lower.
• For the week ended June 25, there were 231,000 new claims for unemployment insurance, a decrease of 2,000 from the previous week’s level, which was revised up by 4,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 18 was 0.9%, a decrease of 0.1 percentage point from the previous week’s rate, which was revised up by 0.1 percentage point to 1.0%. The advance number of those receiving unemployment insurance benefits during the week ended June 18 was 1,328,000, a decrease of 3,000 from the previous week’s level, which was revised up by 16,000. States and territories with the highest insured unemployment rates for the week ended June 11 were California (1.8%), New Jersey (1.8%), Puerto Rico (1.6%), Alaska (1.4%), New York (1.4%), Pennsylvania (1.4%), Rhode Island (1.3%), Hawaii (1.2%), Illinois (1.2%), and Massachusetts (1.2%). The largest increases in initial claims for the week ended June 18 were in Michigan (+1,849), Texas (+1,350), New Jersey (+897), Connecticut (+863), and Puerto Rico (+860), while the largest decreases were in Illinois (-2,595), California (-1,189), South Carolina (-731), Georgia (-621), and Florida (-535).

Eye on the Week Ahead The employment data for June is available this week. May saw 390,000 new jobs added, and hourly wages increased by 0.3%. For the 12 months ended in May, wages have risen 5.2%, driven higher by greater employer demand for workers.

The Markets (second quarter through June 30, 2022)

For the first time since 2015, each of the benchmark indexes lost value for two consecutive quarters. They also posted losses for June, marking three consecutive down months for the tech-heavy Nasdaq, its longest losing streak since 2015. Investors watched for signs of an economic deceleration in the U.S., with inflation continuing to run at multi-decade highs, and monetary policymakers maintaining a firm stance that their priority remains bringing down prices even if it means slowing economic growth. Nevertheless, Wall Street has suffered one of its worst six-month stretches in decades. The S&P 500 is poised for its worst first half since 1962. Ten-year Treasury yields climbed from 2.37% at the beginning of the quarter to over 3.00%. The dollar is on pace for its best quarter since 2016. Consumer spending slowed for the first time this year, possibly indicating that the economy is indeed weakening. Consumer sentiment fell to its lowest level since 2021. Crude oil prices rose marginally in the quarter, spiking at $123.18 per barrel in early June, ultimately settling at around $105.00 by the end of the quarter. Gold prices declined each month of the quarter as investors weighed rising interest rates against fears of a recession. According to AAA, as of June 30, the average price for regular gasoline was $4.857 per gallon, $0.90 less than the previous week but $1.80 per gallon more than than a year ago. As prices for crude oil and gasoline increased, demand waned, helping to pull prices lower. In addition, OPEC+ agreed to increase output in July and August to compensate for the drop in production due to the sanctions placed on Russia.

Equities fell sharply in April as some disappointing earnings data from several mega-cap companies added to investor worries about rising inflation, the war in Ukraine, and the possibility of an economic pullback. The Nasdaq dropped the most since October 2008, falling nearly 24.0% from its peak as it entered bear territory. The S&P 500 notched its worst month since the beginning of the pandemic, dragged lower by heavy losses in communication services, consumer discretionary, and information technology. Bond prices also lagged as yields increased in anticipation of rising interest rates as part of the Federal Reserve’s plan to quell inflation. While consumers worried about cost containment and its impact on the economy, one factor helping to drive inflation higher was strong wage growth propelled by a tight labor market. Weekly jobless claims fell to their lowest level since 1970, while the unemployment rate dropped to a pre-pandemic 3.6%. Entering May, Americans remained focused on rising inflation, the ongoing war in Ukraine, lockdowns in China due to rising COVID numbers, and the impact of the Fed’s program of fiscal tightening.

May proved to be a month of market swings. Equities lost value for the first three weeks of the month. However, a late rally helped the benchmark indexes close the month relatively flat, with the exception being the tech-heavy Nasdaq, which followed April’s sharp declines by falling another 2.0%. Early in the month the Federal Reserve raised interest rates 50 basis points and announced plans to start reducing its balance sheet in June. The Fed’s hawkish pronouncements in its effort to curb rising inflation spurred worries of a recession, despite solid economic data from the prior month.

Stocks soured in June as a slowdown in consumer spending (personal consumption expenditures), which accounts for nearly 70% of economic activity, prompted concerns about a recession. The Federal Reserve increased the target range for the federal funds rate 75 basis points, more than expected, as forecasters estimated a 50-basis point rate increase. Despite a surge mid-month, each of the benchmark indexes ended June in the red. Crude oil prices fell in June, the first monthly decrease since November. The dollar advanced, while gold prices slid lower.

Stock Market Indexes

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.

Latest Economic Reports

• Employment: Employment rose by 390,000 in May. Notable job gains occurred in leisure and hospitality, in professional and business services, and in transportation and warehousing. Despite the increase, employment is down by 822,000, or 0.5%, from its pre-pandemic level in February 2020. The unemployment rate remained at 3.6% for the third month in a row. The number of unemployed persons was essentially the same at 6.0 million. By comparison, in February 2020 prior to the coronavirus (COVID-19) pandemic, the unemployment rate was 3.5%, and the number of unemployed persons was 5.7 million. Among the unemployed, the number of workers who permanently lost their jobs was unchanged at 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 fell to 1.8 million. The labor force participation rate increased 0.3 percentage point to 62.3% in May. The employment-population ratio increased by 0.3 percentage point to 60.2%. In May, average hourly earnings rose by $0.10 to $31.95. Over the last 12 months ended in May, average hourly earnings increased by 5.2%. The average work week was 34.6 hours in May, unchanged for the third consecutive month.
• There were 231,000 initial claims for unemployment insurance for the week ended June 25, while the total number of insured unemployment claims was 1,328,000 as of June 18. During the second quarter of the year, claims for unemployment fell to their lowest levels since 1970. A year ago, there were 3,266,000 insured unemployment claims.
• FOMC/interest rates: Following its meeting in June, the Federal Open Market Committee increased the federal funds target rate range by 75 basis points to 1.50%-1.75%. 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 1.6% in the first quarter of 2022. GDP advanced 6.9% in the fourth quarter of 2021. A record surge in the trade deficit was largely responsible for the decline in first-quarter GDP. Also, consumer spending, as measured by personal consumption expenditures, rose 1.8%, down from 2.5% in the fourth quarter of 2021. Consumers cut spending on goods such as clothes, home furnishings, and food. Fixed investment advanced 7.4%, driven higher by a 10.0% increase in nonresidential (business) fixed investment. Exports dropped 4.8%, while imports, a negative in the calculation of GDP, increased 18.9%. Also dragging GDP lower was a 6.8% decrease in federal government spending, while state and local government spending dipped 0.5%. The personal consumption expenditures (PCE) price index, a measure of inflation, increased 7.1%. Excluding food and energy prices, the PCE price index increased 5.2%.
• The Treasury budget deficit came in at $66.2 billion in May, 50.0% smaller than the $132.0 billion shortfall in May 2021. Through the first eight months of fiscal year 2022, the deficit sits at $426.2 billion, 79.0% lower than the deficit over the same period in fiscal year 2021 as outlays dropped 19.0%, while receipts increased 29.0%. So far in this fiscal year, individual income tax receipts have risen 46.0% and corporate income tax receipts have increased 17.0%.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report for May, both personal income and disposable personal income rose 0.5%, the same increase as in the previous month. Consumer spending increased 0.2% following a 0.6% jump in April. Consumer prices climbed 0.6% in May after advancing 0.2% in April. Consumer prices have risen 6.3% since May 2021.
• The Consumer Price Index climbed 1.0% in May after climbing 0.3% in the previous month. The May increase was broad-based, with advances in prices for shelter, gasoline, and food being the largest contributors. The gasoline index rose 4.1% in May, prices for food rose 1.0%, and the index for shelter increased 0.6%. The CPI increased 8.6% for the 12 months ended in May, the largest 12-month increase since the period ending December 1981.
• Prices that producers receive for goods and services jumped 0.8% in May following a 0.4% increase in April. Producer prices have increased 10.8% since May 2021. Prices less foods, energy, and trade services increased 0.5% in May and 6.8% since May 2021. In May, nearly two-thirds of the rise in the PPI was due to a 1.4% advance in prices for final demand goods. Prices for final demand services increased 0.4%. A major factor in the May increase in the prices for goods was a 5.0% increase in energy prices, within which gasoline prices spiked 8.4%.
• Housing: Sales of existing homes retreated for the fourth consecutive month in May, falling 3.4% from the April estimate. Year over year, existing home sales were 8.6% under the May 2021 total. According to the latest survey from the National Association of Realtors®, home sales have essentially returned to the levels seen in 2019, prior to the pandemic, after two years of exceptional performance. The median existing-home price was $407,600 in May, up from $395,500 in April and 14.8% more than May 2021 ($355,000). Unsold inventory of existing homes represents a 2.6-month supply at the current sales pace. Sales of existing single-family homes also fell, down 3.6% in May. Sales of existing single-family homes have fallen 7.7% since May 2021. The median existing single-family home price was $414,200 in May, up from $401,700 in April and up 14.6% from May 2021 ($361,300).
• Sales of new single-family homes rose 10.7% in May, the first advance in the last five months. The median sales price of new single-family houses sold in May was $449,000 ($454,700 in April). The May average sales price was $511,400 ($569,500 in April). The inventory of new single-family homes for sale in May represented a supply of 7.0 months at the current sales pace, down from April’s 7.6-month supply. Sales of new single-family homes in May were 5.9% below the May 2021 estimate.
• Manufacturing: Industrial production increased 0.2% in May following a 1.4% increase in April. In May, manufacturing output declined 0.1% after three months when growth averaged nearly 1.0%. The indexes for utilities and mining rose 1.0% and 1.3%, respectively, in May. Total industrial production was 5.8% higher than it was a year earlier. Since May 2021, manufacturing has risen 4.8%, mining has jumped 9.0%, while utilities increased 8.4%.
• May saw new orders for durable goods increase $1.9 billion, or 0.7%, marking the seventh monthly increase out of the last eight months. Excluding transportation, new orders rose 0.7% in May. Excluding defense, new orders increased 0.6%. Transportation equipment, up two consecutive months, led the increase, up $0.7 billion, or 0.8%.
• Imports and exports: Import prices rose 0.6% in May after advancing 0.4% in April, according to the U.S. Bureau of Labor Statistics. Higher fuel prices offset lower nonfuel prices to account for the overall May increase. Fuel import prices rose 7.5% in May, with higher petroleum and natural gas prices both contributing to the increase. The price index for import fuel rose 73.5% over the past year, the largest 12-month advance since increasing 87.0% in November 2021. Prices for nonfuel imports declined 0.3% in May, the first monthly decrease since November 2020. Prices for U.S. exports advanced 2.8% in May following a 0.8% rise the previous month. Higher prices for both nonagricultural and agricultural exports contributed to the export price rise in May. Export prices have risen 18.9% since May 2021, the largest year-over-year rise since September 1984.
• The international trade in goods deficit was $104.3 billion in May, down $2.4 billion, or 2.2%, from April. Exports of goods were $176.6 billion in May, $2.0 billion more than in April. Imports of goods were $280.9 billion, $0.4 billion less than April imports.
• The latest information on international trade in goods and services, released June 7, is for April and shows that the goods and services trade deficit declined by $20.6 billion to $87.1 billion from the March deficit. April exports were $252.6 billion, $8.5 billion more than March exports. April imports were $339.7 billion, $12.1 billion less than March imports. Year over year, the goods and services deficit increased $107.9 billion, or 41.1%, from the same period in 2021. Exports increased $151.3 billion, or 18.8%. Imports increased $259.2 billion, or 24.3%.
• International markets: The United States is not the only country seeing rising costs. Several European nations, plus Israel and South Korea, have seen surges in inflation since the start of the pandemic. Germany, France, Spain, and Italy have seen inflation spike recently. South Korea’s inflation reached a 13-year high in April, while Israel, which had maintained low inflation rates through 2021, saw inflation jump 25.0% from the first quarter of 2020 to the beginning of 2022. Inflation rates in the United Kingdom hit a 40-year high in May, up 9.1%. Several countries have taken various measures to try to curb inflationary pressures, from freezing the price of gas and electricity (“tariff shield”), to transfers to the most vulnerable (e.g., energy vouchers), temporary tax reductions or discounts on fuel prices, and price regulation. Of course, several countries have also tightened monetary policy by raising interest rates. Overall, for the markets in June, the STOXX Europe 600 Index declined 5.7%. The United Kingdom’s FTSE slid 2.7%. Japan’s Nikkei 225 Index fell 2.4%, while China’s Shanghai Composite Index rose 5.6%.
• Consumer confidence: The Conference Board Consumer Confidence Index® decreased in June following a decline in May. The index stands at 98.7, down from 103.2 in May. The overall index is at its lowest level since February 2021. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, declined to 147.1 in June, down marginally from 147.4 in May. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, declined to 66.4 in June (73.7 in May), its lowest level since March 2013.

Eye on the Month Ahead

Inflation continued to run hot in June, prompting a plan of fiscal tightening from the Federal Reserve, which included a 75-basis point interest rate increase. The Fed meets again in July and is certain to increase interest rates by at least 50 basis points, with the growing likelihood of another 75-basis point jump, particularly since the Fed does not meet again until September. The first estimate of second-quarter gross domestic product is also out in July. The economy retracted 1.5% in the first quarter.