Author: dredheadz

The Markets (as of market close August 18, 2023)

After another week of strong economic data, investors seemed to accept that the Fed may not be done lifting interest rates after all — and that Wall Street might have started celebrating the end of the rate-hike cycle too soon. Each of the benchmark indexes listed here dropped more than 2% by the end of the week, as did crude oil prices. Gold prices also fell, while the dollar advanced. Yields on 10-year Treasuries continued their upward march, reaching 15-year highs.

Tech stocks rebounded last Monday, pushing the Nasdaq up 1.1%. The S&P 500 advanced 0.6%, and the Dow inched up 0.1%. The Russell 2000 ticked down 0.2% while the Global Dow declined 0.4%, likely impacted by the growing level of concern about China’s troubled real estate market. The 10-year Treasury yield ended the day higher at 4.18%. Crude oil and gold prices dipped, but the U.S. dollar was little changed.

Equities fell across the board on Tuesday, with each of the benchmark indexes — and all 11 of the S&P market sectors — suffering losses. The Russell 2000 declined 1.3%, followed by the S&P 500 (-1.2%), the Nasdaq (-1.1%), the Dow (-1.0%), and the Global Dow (-1.0%). It was the first day since May that the Dow, S&P 500, and Nasdaq all fell more than 1%. A strong retail sales report helped drive up the 10-year Treasury yield to 4.22%. Crude oil and gold prices fell, and the dollar was flat.

Stock prices continued their retreat last Wednesday, after the minutes from the most recent Fed meeting revealed that committee members are divided on whether more interest rate hikes will be needed to knock down inflation. The Russell 2000 declined 1.3%, followed by the Nasdaq (-1.2%), the Global Dow (-1.0%), and the S&P 500 (-0.8%). The Dow dipped 0.5%. Wall Street also fretted over the rising 10-year Treasury yield, which ended the day at a 15-year high of 4.26%. Oil and gold prices fell again, but the dollar rose.

On Thursday, investors watched stock prices tumble for the third day in a row. The tech-heavy Nasdaq and small-cap stocks that make up the Russell 2000 dropped 1.2%, while the S&P 500 and the Dow declined 0.8%, and the Global Dow lost 0.7%. Energy was the only sector that did not post a loss. The government bond market extended its worrisome sell off, pushing up the yield on 10-year Treasuries by 5 basis points to 4.31%, the highest level since 2007. Crude oil prices advanced to $80.06 per barrel after a three-day drop, gold prices fell, and the dollar was unchanged.

Last Friday, stocks capped off a volatile week with mixed returns. Energy and defensive sectors such as utilities and consumer staples outperformed, while communication services saw the steepest declines. The Russell 2000 posted a modest gain of 0.5%, and the Dow edged up less than 0.1%. The Global Dow and the Nasdaq dipped 0.3% and 0.2%, respectively. The S&P 500 ended the day flat. The 10-year Treasury yield fell to 4.25%. Crude oil prices increased to $81.40 per barrel. Gold prices inched up, but the dollar pulled back slightly.

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

• Retail sales surged 0.7% in July from the previous month — the fastest pace since January — and have increased 3.2% since July 2022. Retail trade sales advanced 0.6% from June and 2.0% from July 2022. Nonstore (online) retail sales increased 1.9% from June and 10.3% from July 2022, while sales at food services and drinking places were up 1.4% from June and 11.9% higher than last year. Other retailers that outperformed last month include sporting goods, hobby, musical instrument, and book stores (1.5%); clothing & clothing accessories stores (1.0%); and department stores (0.9%). Retailers that showed weakness in July (and tend to be sensitive to high interest rates) include furniture & home furnishing stores (-1.8%); electronics and appliance stores (-1.3%); and auto dealers (-0.4%).
• Prices for U.S. imports rose 0.4% in July after falling 0.1% the previous month. Despite the July increase, which was driven by higher fuel prices, U.S. import prices declined 4.4% over the past 12 months, after increasing 8.8% from July 2021 to July 2022. Export prices increased 0.7% in July, following a 0.7% decline in June. Even though July saw the largest monthly advance since June 2022, U.S. export prices have fallen 7.9% over the last 12 months.
• The number of residential building permits issued in July increased 0.1% from the June total and is 13.0% below the July 2022 figure. Issued building permits for single-family housing increased 0.6% in July to an annual rate of 930,000 units, the highest level in more than a year. Permits for housing projects with five units or more fell 0.2% last month and were 32.2% below the level in July 2022. Housing starts increased 3.9% last month and were 5.9% above the total from a year earlier. Single-family housing starts in July were 6.7% above the prior month’s rate. Home completions dropped 11.8% in July from June and were 5.4% below the July 2022 total. Single-family home completions in July were 1.3% higher than June’s figure.
• Industrial production rose 1.0% in July after falling in the two previous months. Manufacturing output and mining both climbed 0.5% in July after falling 0.5% and 0.9%, respectively, in June. Utilities shot up 5.4%, as hot weather spurred demand for cooling. Overall, total industrial production in July was 0.2% below last year’s level. Most major market groups recorded growth in July. Production of consumer goods led the pack with an increase of 1.4%, boosted by a 4.8% jump in the output of automotive products.
• The national average retail price for regular gasoline was $3.850 per gallon on August 14, $0.022 per gallon higher than the prior week’s price but $0.088 less than a year ago. Also, as of August 14, the East Coast price decreased $0.026 to $3.711 per gallon; the Midwest price climbed $0.090 to $3.768 per gallon; the Gulf Coast price fell $0.038 to $3.415 per gallon; the Rocky Mountain price ticked up $0.010 to $3.954 per gallon; and the West Coast price advanced $0.074 to $4.759 per gallon.
• For the week ended August 12, there were 239,000 new claims for unemployment insurance, a decrease of 11,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended August 5 was 1.2%, an increase of 0.1% from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 5 was 1,716,000, an increase of 32,000 from the previous week’s unrevised level. States and territories with the highest insured unemployment rates for the week ended July 29 were Puerto Rico (2.6%), New Jersey (2.5%), California (2.2%), Rhode Island (2.0%), Massachusetts (2.0%), Connecticut (1.9%), New York (1.9%), Oregon (1.9%), Pennsylvania (1.8%), and Minnesota (1.7%). The largest increases in initial claims for unemployment insurance for the week ended August 5 were in Ohio (+5,416), California (+2,363), Texas (+2,237), New Jersey (+1,622), and Connecticut (+1,288), while the largest decreases were in Missouri (-2,644), Florida (-410), Iowa (-335), Arkansas (-198), and Kentucky (-79).

Eye on the Week Ahead

Data on the housing sector for July is available this week. Sales of both new and existing homes declined in June due to rising mortgage rates and dwindling inventory. However, home prices have remained strong. Investors will also be looking for insight from the Federal Reserve’s Economic Symposium in Jackson Hole, where central bankers from around the world will meet to discuss the health of the global economy.

The Markets (as of market close August 11, 2023)

The S&P 500 and the Nasdaq fell for the second straight week, while the Dow outperformed the benchmark indexes listed here. Stocks have been relatively soft so far in August, which is not out of the ordinary. A slightly hotter-than-expected uptick in producer prices (see below) likely pushed Treasury yields higher, while cooling mega-cap growth shares, which are generally sensitive to interest rate movements. Several market sectors ended the week lower, with information technology (-4.3%) and consumer discretionary (-2.3%) falling the furthest, while energy (+3.6%) and health care (+2.1%) advanced the most. Corporate earnings season for the second quarter is winding down. With roughly 85% of the S&P 500 companies reporting results, nearly 81% have beaten profit estimates. The dollar strengthened, while gold prices notched the worst weekly performance in over a month.

Stocks jumped higher to begin the week last Monday. Each of the benchmark indexes listed here performed well enough to recoup losses from the previous week. Large caps outperformed, with the Dow gaining 1.2% and the S&P 500 adding 0.9%. The Nasdaq and the Global Dow rose 0.6%, while the Russell 2000 inched up 0.1%. Yields on 10-year Treasuries settled at 4.07%, after climbing 1.8 basis points. Crude oil prices fell 0.4% to end the day at about $82.52 per barrel. The dollar gained less than 0.1%, while gold prices fell 0.3%.

The benchmark indexes listed here declined last Tuesday as Wall Street couldn’t maintain the previous day’s momentum. The Nasdaq dropped 0.8%, followed by the Global Dow (-0.7%), the Russell 2000 (-0.6%), the Dow (-0.5%), and the S&P 500 (-0.4%). Ten-year Treasury yields declined 5.2 basis points, ending the day at 4.02%. Crude oil prices gained over 1.0% to close at about $82.80 per barrel. The dollar gained nearly 0.5%, while gold prices fell by about the same amount.

Stocks slid for the second straight day last Wednesday as investors may have been concerned that the upcoming Consumer Price Index would show prices rose in July. The Nasdaq declined 1.2%, falling the furthest among the benchmark indexes listed here. The Russell 2000 declined 0.9%, followed by the S&P 500 (-0.7%), the Dow (-0.5%), and the Global Dow (-0.1%). Crude oil prices rose 1.7% to $84.30 per barrel, the highest price per barrel in a year. Ten-year Treasury yields dipped 1.4 basis points to settle at 4.01%. The dollar and gold prices declined.

Wall Street saw a mini-bear run end last Thursday. Of the benchmark indexes listed here, only the Russell 2000 fell (-0.4%). While gains were not particularly noteworthy, the remaining indexes closed in the black, led by the Global Dow (0.3%), followed by the Dow (0.2%), and the Nasdaq (0.1%). The S&P 500 gained less than 0.1 percentage point. Investors seemed to react cautiously following the release of the latest Consumer Price Index (see below). Crude oil prices declined 1.8% to $82.86 per barrel after hitting a 12-month high the previous day. Ten-year Treasury yields rose 6.8 basis points to reach 4.08%. The dollar edged higher, while gold prices slid lower.

Stocks ended the week with mixed results last Friday. The Dow (+0.3%) and the Russell 2000 (+0.1%) ticked higher, while the Nasdaq (-0.7%), the Global Dow (-0.6%), and the S&P 500 (-0.1%) declined. Yields on 10-year Treasuries settled at 4.16% after climbing 8.8 basis points. Crude oil prices advanced 0.3%. The dollar had its best day in several sessions, closing up 0.3%. Gold prices fell 0.2%.

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

• Consumer prices rose 0.2% in July, the same increase as in June. For the 12 months ended in July, consumer prices have risen 3.2%, after increasing 3.0% for the 12 months ended in June. Consumer prices less food and energy also advanced 0.2%, matching the June increase. Year over year, consumer prices less food and energy dipped 0.1 percentage point to 4.7%. In July, prices for shelter (+0.4%) were by far the largest contributor to the monthly advance, accounting for over 90% of the increase. Food prices increased 0.2% in July after increasing 0.1% the previous month. Prices for energy rose 0.1% last month after rising 0.6% in June. Since July 2022, prices for shelter rose 7.7%, food prices increased 4.9%, while energy prices decreased 12.5%. Other indexes with notable increases over the last 12 months include motor vehicle insurance (+17.8%), recreation (+4.1%), new vehicles (+3.5%), and household furnishings and operations (+2.9%).
• Prices producers received for goods and services rose 0.3% in July after being flat in June and declining 0.3% in May. In July, prices for services increased 0.5% (the largest monthly increase since August), while prices for goods inched up 0.1%. Since July 2022, producer prices advanced 0.8%. Prices less foods, energy, and trade services (core prices) moved up 0.2% last month, the largest increase since February. For the 12 months ended in July, core prices advanced 2.7%.
• The goods and services trade deficit was $65.5 billion in June, down $2.8 billion, or 4.1%, from May. June exports dipped $0.3 billion, or 0.1%, while imports fell $3.1 billion, or 1.0%. Year to date, the goods and services deficit decreased $117.7 billion, or 22.3%, from the same period in 2022. Exports increased $37.6 billion, or 2.5%. Imports decreased $80.1 billion, or 4.0%.
• The Federal Treasury budget deficit was $220.8 billion in July, marginally lower than the June deficit, but about $10.0 billion over the July 2022 deficit. Through 11 months of fiscal year 2023, the deficit sits at $1,613.4 trillion. Over the same period in fiscal year 2022, the deficit was $726.1 billion. In July, total government expenditures exceeded receipts by $220.7 billion.
• The national average retail price for regular gasoline was $3.828 per gallon on August 7, $0.071 per gallon higher than the prior week’s price but $0.210 less than a year ago. Also, as of August 7, the East Coast price increased $0.091 to $3.737 per gallon; the Midwest price climbed $0.066 to $3.678 per gallon; the Gulf Coast price rose $0.037 to $3.453 per gallon; the Rocky Mountain price increased $0.071 to $3.944 per gallon; and the West Coast price advanced $0.069 to $4.685 per gallon.
• For the week ended August 5, there were 248,000 new claims for unemployment insurance, an increase of 21,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 29 was 1.1%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 29 was 1,684,000, a decrease of 8,000 from the previous week’s level, which was revised down by 8,000. States and territories with the highest insured unemployment rates for the week ended July 22 were New Jersey (2.6%), California (2.3%), Puerto Rico (2.2%), Rhode Island (2.1%), Massachusetts (2.0%), Connecticut (1.9%), New York (1.8%), Oregon (1.8%), Pennsylvania (1.8%), and Minnesota (1.7%). The largest increases in initial claims for unemployment insurance for the week ended July 29 were in Missouri (+2,644), New Jersey (+730), Illinois (+723), Florida (+533), and Tennessee (+365), while the largest decreases were in California (-3,108), Ohio (-2,952), Georgia (-1,373), Texas (-1,102), and New York (-1,001).

Eye on the Week Ahead

The latest data on retail sales for July is released this week. June saw retail sales inch up 0.2%. Retail sales have increased between 0.1% and 0.4% since May after dropping 0.8% in April. The Federal Reserve’s report on industrial production is also out this week. Industrial production has declined each month since May, when it rose 0.5%.

The Markets (as of market close August 4, 2023)

Stocks endured a losing week for the first time since early July. Each of the benchmark indexes listed here lost value, with the S&P 500 and the Nasdaq suffering the steepest weekly declines since March. Investors dealt with the downgrade of the U.S. government’s credit rating and evidence that job growth may be slowing (see below). Corporate earnings have generally matched or beaten expectations, but a couple of bellwether tech and communications companies proffered disappointing earnings. Bond prices fell, pushing yields higher. The dollar rose higher, while gold prices slid lower. Crude oil prices increased for the sixth straight week, the longest streak in more than a year.

Wall Street closed out the month of July on an uptick, with each of the benchmark indexes listed here posting gains by the close of trading last Monday. The Russell 2000 advanced 1.1% to lead the indexes, followed by the Global Dow and the Dow (0.3%). The Nasdaq and the S&P 500 rose 0.2%. Ten-year Treasury yields closed the day where they began at 3.95%. Crude oil prices dipped marginally to settle at $81.65 per barrel. The dollar was flat, while gold prices fell 0.4%.

Stocks closed generally lower last Tuesday, with only the Dow (0.2%) advancing among the benchmark indexes listed here. The Global Dow fell 0.7%, followed by the Russell 2000 (-0.5%), the Nasdaq (-0.4%), and the S&P 500 (-0.3%). Most of the market sectors lost value, with only industrials and information technology gaining ground. Crude oil prices declined for the second straight session, falling 0.1% to $81.73 per barrel. The yield on 10-year Treasuries rose 9.2 basis points to 4.05%. The dollar gained traction, climbing 0.4%, while gold prices slid 1.4%.

The stock market took a tumble last Wednesday, with the Nasdaq experiencing its worst day in nearly five months. Investors may have been rattled after the credit rating firm Fitch downgraded the U.S. government’s credit rating, which prompted an angry response from the White House and the Treasury Department. Fitch based its rating decision, in part, on the federal government’s growing levels of debt and political instability, including the January 6, 2021 attack on the Capitol. The Nasdaq slid 2.2%, followed by the Global Dow (-1.6%), the Russell 2000 and the S&P 500 (-1.4%), and the Dow (-1.0%). Yields on 10-year Treasuries rose 2.7 basis points to 4.07%. Crude oil prices continued to decline, dropping nearly 2.0% to $79.79 per barrel. The dollar rose 0.3%, while gold prices fell 0.4%.

Stocks declined for a third straight session last Thursday as investors continued to react to Fitch’s downgrade of U.S. bonds. Ten-year Treasury yields spiked 11.1 basis points to 4.18%, the highest yield in nine months, while the dollar slipped lower, impacted by the credit downgrade. The Global Dow fell the furthest, down 0.4%, followed by the Russell 2000 and the S&P 500, which dipped 0.3%. The Dow lost 0.2%, while the Nasdaq essentially broke even, down 0.1%. Crude oil prices reversed course, gaining 2.8% to $81.71 per barrel. Gold prices declined 0.3%.

Wall Street closed lower last Friday to end a disappointing week for stocks. Only the Global Dow (0.4%) advanced among the benchmark indexes listed here. The S&P 500 slid 0.5%, followed by the Dow and the Nasdaq, which fell 0.4%. The small caps of the Russell 2000 dipped 0.2%. Ten-year Treasury yields, which had climbed for most of the week, fell nearly 13.0 basis points on the day. Crude oil prices rose 1.3%. The dollar declined 0.5%. Gold prices ended the day up 0.4%.

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 slowed in July, with the addition of 187,000 new jobs, well below the average monthly gain of 312,000 over the prior 12 months. In July, job gains occurred in health care, social assistance, financial activities, and wholesale trade. The unemployment rate ticked down 0.1 percentage point to 3.5%. The labor force participation rate and the employment-population ratio, at 62.6% and 60.4% respectively, were virtually unchanged from the previous month. The total number of unemployed declined by 116,000 to 5.8 million. In July, average hourly earnings rose by $0.14, or 0.4%, to $33.74. Over the past 12 months, average hourly earnings have increased by 4.4%. The average workweek edged down by 0.1 hour to 34.3 hours in July. Employment gains for May and June were revised down by 25,000 and 24,000, respectively. With these revisions, employment in May and June combined was 49,000 lower than previously reported. The revisions for May and June, coupled with July’s figures, indicated job growth decelerated since the first quarter.
• While the overall economy seems to be holding up despite rising interest rates, one sector that apparently has been impacted is manufacturing. According to the latest survey by S&P Global, U.S. manufacturing declined further in July following a downturn in June. New orders contracted, leading firms to scale back their input buying, which caused a depletion in inventories. Purchasing managers also reported a rise in raw material costs, although selling prices remained stable as manufacturers tried to stay competitive and drive sales.
• Unlike manufacturing, the services sector continued to expand in July, but at a slower pace than in the previous month. Business activity and new orders increased, although rising interest rates weighed on customer spending. Nevertheless, exports rose at a faster pace. Meanwhile, cost pressures for service providers softened, with prices rising at the slowest pace since December 2022.
• According to the latest Job Openings and Labor Turnover report, the number of job openings in June, at 9.6 million, was little changed from the previous month. The number of hires decreased by 326,000 in June from May, while total separations fell by 288,000. Within separations, the number of quits (voluntary separations initiated by the employee) decreased by 295,000 in June, while the number of layoffs and discharges changed minimally from May.
• The national average retail price for regular gasoline was $3.757 per gallon on July 31, $0.161 per gallon higher than the prior week’s price but $0.435 less than a year ago. Also, as of July 31, the East Coast price increased $0.158 to $3.646 per gallon; the Midwest price climbed $0.208 to $3.612 per gallon; the Gulf Coast price rose $0.173 to $3.416 per gallon; the Rocky Mountain price increased $0.118 to $3.873 per gallon; and the West Coast price advanced $0.077 to $4.616 per gallon.
• For the week ended July 29, there were 227,000 new claims for unemployment insurance, an increase of 6,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 22 was 1.1%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 22 was 1,700,000, an increase of 21,000 from the previous week’s level, which was revised down by 11,000. States and territories with the highest insured unemployment rates for the week ended July 15 were Puerto Rico (2.6%), New Jersey (2.5%), California (2.3%), Rhode Island (2.2%), Connecticut (2.1%), Massachusetts (2.0%), New York (1.8%), Oregon (1.8%), Pennsylvania (1.8%), and Minnesota (1.7%). The largest increases in initial claims for unemployment insurance for the week ended July 22 were in Vermont (+239), Oklahoma (+93), West Virginia (+41), the Virgin Islands (+23), and South Dakota (+8), while the largest decreases were in New York (-9,526), California (-5,310), Georgia (-2,853), Pennsylvania (-2,816), and South Carolina (-2,545).

Eye on the Week Ahead

Inflation data for July is available this week. The most recent Consumer Price Index showed prices rose 0.2% in June, while the 12-month increase was 3.0%. The Producer Price Index revealed prices inched up 0.1% in June and 0.1% over the last 12 months. Inflationary pressures are clearly waning, while the economy has shown resilience.

The Markets (as of market close July 31, 2023)

Stocks closed higher in July, with each of the benchmark indexes listed here posting notable gains. Both the stock market in particular, and the economy in general, have proven to be resilient in 2023, despite rising interest rates.

The Federal Reserve, in its endeavor to bring inflation down to the government’s 2.0% target, hiked interest rates another 25.0 basis points in July, to the highest level in 22 years (see below). However, there are clear signs that inflation is finally receding. The Consumer Price Index and the personal consumption expenditures price index saw their respective 12-month rates fall to the lowest levels in nearly two years. Import and export prices dipped lower in July, as did producer prices.

The battle to reign in rising prices has also been waged throughout much of the world. While several countries in Europe and Canada have seen inflationary pressures begin to slide, they remain above preferred target rates.

Consumer spending, the bellwether of economic growth, continued to increase, although not quite at the pace set earlier in the year. The same can be said for gross domestic product, which accelerated in the second quarter and has continued to advance since the second quarter of 2022.

Employment also remained strong, with more than 200,000 new jobs added, while the unemployment rate sat at 3.6%. Wages continued to rise, however, increasing nearly 4.5% over the last 12 months. Unemployment claims are up from a year ago (see below) but remain well under the ballooning figures seen during the height of the COVID pandemic.

While many economic indicators showed strength last month, several sectors retreated. The housing market has retreated, primarily due to lack of inventory and advancing mortgage rates. Sales of new and existing homes floundered, although home prices remained strong.

Industrial production declined (see below), having fallen for two straight months. According to the latest survey from the S&P Global US Manufacturing Purchasing Managers’ Index™, purchasing managers also noted a retraction in manufacturing.

While the economy remained relatively strong, the stock market proved equally robust. The S&P 500 and the Nasdaq enjoyed five straight months of gains, closing out their best seven-month stretch to start the year since 1997. Year to date, the Nasdaq is up more than 37.0%, while the S&P 500 exceeded 19.0%. In July, the Dow saw a run of 13 consecutive sessions with gains.

Last month, all of the market sectors advanced. Some notable performers included energy (8.0%), communication services (7.8%), financials (5.7%), and materials (4.0%). Information technology rose 4.5%, driven higher by rising artificial intelligence stocks.

Bond prices fell lower in July, with yields increasing over the previous month. Ten-year Treasury yields rose 14.0 basis points from June. The 2-year Treasury yield ended July at 4.85%, down 7.0 basis points from a month earlier. The dollar dipped lower against a basket of world currencies. Gold prices ended July higher. Crude oil prices climbed in July for the second straight month. After falling for much of the year, a cutback in crude oil production has driven prices higher. Rising oil prices also impacted prices at the pump. The retail price of regular gasoline was $3.596 per gallon on July 24, $0.025 higher than the price a month earlier but $0.734 lower than a year ago.

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 the performance of specific investments.

Latest Economic Reports

• Employment: Employment rose by 209,000 in June from May compared with an average monthly gain of 278,000 so far this year. In June, employment trended upward in government, health care, social assistance, and construction. The unemployment rate edged down 0.1 percentage point to 3.6%. In June, the number of unemployed persons fell by 140,000 to 5.9 million. The employment-population ratio, at 60.3%, and the labor force participation rate, at 62.6%, were unchanged in June from the previous month. Both measures have shown little net change since early 2022. In June, average hourly earnings increased by $0.12 to $33.58. Over the 12 months ended in June, average hourly earnings rose by 4.4%. The average workweek in June, at 34.4 hours, edged up 0.1 hour from May.
• There were 221,000 initial claims for unemployment insurance for the week ended July 22, 2023. The total number of workers receiving unemployment insurance was 1,690,000. By comparison, over the same period last year, there were 211,000 initial claims for unemployment insurance, and the total number of claims paid was 1,317,000.
• FOMC/interest rates: The Federal Open Market Committee raised the federal funds target range rate by 25.0 basis points in July, bringing the target range for the federal funds rate to its highest level since 2001. The Committee noted that inflation remained elevated, while economic activity expanded at a moderate pace. Job gains have been robust, and the unemployment rate remained low. The FOMC statement indicated that the U.S. banking system was sound and resilient. Overall, the FOMC will base its decisions on available data and “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
• GDP/budget: Economic growth remained steady in the second quarter, as gross domestic product increased 2.4%, compared with a 2.0% increase in the first quarter. The acceleration in second-quarter GDP compared to the previous quarter primarily reflected increases in private inventory investment and nonresidential fixed investment. Consumer spending, as measured by personal consumption expenditures, rose 1.6% in the second quarter compared to a 4.2% increase in the first quarter. Consumer spending on long-lasting durable goods inched up 0.4% in the second quarter after advancing 16.3% in the prior quarter. Spending on services rose 2.1% in the second quarter (3.2% in the first quarter). Nonresidential fixed investment increased 7.7% after rising 0.6% in the first quarter. Residential fixed investment fell 4.2% in the second quarter, little changed from the first quarter (-4.0%). Exports decreased 10.8% in the second quarter, following an increase of 7.8% in the first quarter. Imports, which are a negative in the calculation of GDP, decreased 7.8% in the second quarter after advancing 2.0% in the previous quarter. Consumer prices increased 2.6% in the second quarter compared to a 4.1% advance in the first quarter. Excluding food and energy, consumer prices advanced 4.8% in the second quarter (4.9% in the first quarter).
• The federal budget had a $227.8 billion deficit in June, well above the year-earlier deficit of $88.8 billion. The deficit for the first nine months of fiscal year 2023 was $1.393 trillion compared to $515.1 billion through the comparable period of the previous fiscal year. In June, government receipts totaled $418.3 billion for the month and $3.413 trillion for the current fiscal year. Government outlays were $646.1 billion in June and $4.805 trillion through the first nine months of fiscal year 2023. By comparison, receipts in June 2022 were $460.8 billion and $3.835 trillion through the first nine months of the previous fiscal year. Expenditures were $549.6 billion in June 2022 and $4.350 trillion through the comparable period in FY22.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report, consumer spending increased 0.5% in June and 9.1% since June 2022. Personal income and disposable personal income rose 0.3% in June, following a 0.5% increase in May. Consumer prices rose 0.2% in June, as did prices less food and energy. However, prices have risen 3.0% since June 2022. This is the lowest 12-month increase in consumer prices since the year ended in March 2021.
• The Consumer Price Index rose 0.2% in June after increasing 0.1% in May. Over the 12 months ended in June, the CPI advanced 3.0%, down from 4.0% for the year ended in May. This is the lowest 12-month rate since March 2021. Excluding food and energy prices, the CPI rose 0.2% in June and 4.8% over the last 12 months, marking the lowest 12-month rate since October 2021. Prices for shelter, which rose 0.4%, contributed more than 70.0% of the overall increase in the June CPI. Also advancing in June were prices for food (0.2%), energy (0.6%), and apparel (0.3%). For the 12 months ended in June, food prices have increased 3.0%, while energy prices have fallen 16.7%.
• Prices that producers received for goods and services inched up 0.1% in June, following a 0.3% decline in the previous month. Producer prices increased 0.1% for the 12 months ended in June, the lowest 12-month rate since August 2020. Driving the overall increase in producer prices was a 0.2% jump in prices for services. Goods prices were flat. Producer prices excluding food and energy rose 0.1% in June and 2.4% for the year. Energy prices rose 0.7% in June but fell 23.9% since June 2022. Food prices dipped 0.1% in June but were up 0.2% for the 12 months ended in June.
• Housing: Sales of existing homes decreased 3.3% in June. Since June 2022, existing-home sales dropped 18.9%. According to the report from the National Association of Realtors®, sales have fallen 23.0% during the first half of the year. In June, total existing-home inventory sat at a 3.1-month supply at the current sales pace. The dearth of available homes for sale has negatively impacted transactions. The median existing-home price was $410,200 in June, the second-highest price of all time and down only 0.9% from the record-high of $413,800 in June 2022. Sales of existing single-family homes dropped 3.4% in June and 18.8% from June 2022. The median existing single-family home price was $416,000 in June, up from the May price of $401,500 but well below the June 2022 price of $420,900.
• New single-family home sales declined in June, falling 2.5%, marking the first monthly decrease since February. Despite the June decrease, sales were up 23.8% from a year earlier. The median sales price of new single-family houses sold in June was $415,400 ($417,300 in May). The June average sales price was $494,700 ($488,700 in May). The inventory of new single-family homes for sale in June increased to 7.4 months, up from 7.2 months in May.
• Manufacturing: Industrial production declined 0.5% in June after falling 0.2% in May. Manufacturing decreased 0.3% in June, driven lower, in part, by a 3.0% decrease in motor vehicles and parts, and a 1.6% decline in petroleum. In June, mining slid 0.2%, while utilities dropped 2.6%. Total industrial production in June was 0.4% below its year-earlier level. Most major market groups posted declines in June. Consumer durables fell 2.7%, led by decreases in appliances, furniture, and carpeting (-3.8%) and automotive products (-3.6%). The decrease of 0.9% for consumer nondurables reflected declines in clothing (-2.1%), energy (-1.8%), and food and tobacco (-1.3%).
• New orders for durable goods rose for the fourth straight month after increasing 4.7% in June. Excluding transportation, new orders increased 0.6%. Excluding defense, new orders increased 6.2%. Transportation equipment, also up four consecutive months, led the increase, climbing 12.1%.
• Imports and exports: June saw both import and export prices decrease. Import prices fell 0.2%, following a 0.4% decline in May. The June drop in import prices was the fifth decrease out of the first six months of 2023. Imports declined 6.1% over the past year, the largest 12-month decrease since the year ended May 2020. Import fuel prices rose 0.8% in June, offset by a 0.4% decline in nonfuel import prices. Export prices fell 0.9% in June after declining 1.9% in the previous month. Lower prices for nonagricultural exports and agricultural exports in June contributed to the overall decrease. Export prices fell 12.0% from June 2022 to June 2023, the largest over-the-year decline since the series was first published in September 1984.
• The international trade in goods deficit fell $4.0 billion, or 4.4%, in June. Exports of goods increased 0.2% from May, while imports of goods decreased 1.4%.
• The latest information on international trade in goods and services, released July 6, was for May and revealed that the goods and services trade deficit fell $5.5 billion, or 7.3%, from April. Exports for May were $2.4 billion, or 0.8%, below April exports. Imports were $7.5 billion, or 2.3%, less than April imports. Year to date, the goods and services deficit decreased $101.7 billion, or 22.8%, from the same period in 2022. Exports increased $48.0 billion, or 3.9%. Imports decreased $53.7 billion, or 3.2%.
• International markets: Inflation continued to be the dominant topic last month. In the United Kingdom, although consumer prices inched up 0.1% in June, the 12-month rate remained elevated at 7.9%, still about 6.0 percentage points higher than the Bank of England’s target. In France, consumer prices rose 0.2% for the month, while falling from an annual rate of 5.1% to 4.5%. The 12-month rate of inflation in the Eurozone dipped from 6.1% to 5.5%, while Germany saw consumer prices remain at 6.4% for the 12 months ended in June. China, on the other hand, has seen consumer prices fall, which has depleted corporate profits and could lead to a reduction in the workforce. The prospects of Chinese deflation could benefit global trade partners, such as the United States, by easing product prices. However, China’s slowing economy could also reduce that country’s demand for materials and consumer goods, which would negatively impact world trade. For July, the STOXX Europe 600 Index increased 2.3%; the United Kingdom’s FTSE rose 2.3%; Japan’s Nikkei 225 Index fell 1.7%; and China’s Shanghai Composite Index ticked up 1.5%.
• Consumer confidence: Consumer confidence sits at the highest level since July 2021. The Conference Board Consumer Confidence Index® increased in July to 117.0, up from 110.1 in June. The July increase marked the second straight monthly gain in consumer confidence. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, improved to 160.0 in July, up from 155.3 in the previous month. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, rose to 88.3 in July from 80.0 in June. Importantly, according to the Conference Board’s report, the Expectations Index climbed above 80.0, the level associated with a recession. Despite rising interest rates, consumers are more upbeat, likely reflecting falling inflation and a tight labor market.

Eye on the Month Ahead

Investors will focus on corporate earnings and the labor market in August. The Federal Open Market Committee does not meet in August, so there will be no change to the Federal Funds target rate. Manufacturing, which has slowed during the summer months, looks to pick up steam in August.

The Markets (as of market close July 28, 2023)

Stocks enjoyed a favorable week of returns, with each of the benchmark indexes listed here posting solid gains. The Dow and the S&P 500 notched their third straight week of gains. Inflation continued to cool in June, with the smallest 12-month rate increase since March 2021 (see below). So far, corporate earnings for the second quarter have been generally favorable, with some large tech companies beating expectations. Long-term bond prices fell, sending yields higher. Crude oil prices advanced, with global oil prices gaining more than 16.0% since late June. Rising oil prices have spurred an increase in gasoline prices. The dollar slipped lower last week, while gold prices climbed higher.

Wall Street began the week on a high note last Monday, with each of the benchmark indexes finishing the day up. The Dow gained 0.5% to extend its winning streak to 11 straight sessions. The S&P 500 added 0.4%, the Russell 2000 and the Global Dow each rose 0.3%, and the Nasdaq gained 0.2%. Ten-year Treasury yields inched up 2.0 basis points to close at 3.85%. Crude oil prices jumped 2.4%, settling at $78.92 per barrel. The dollar advanced 0.3%, while gold prices dipped 0.5%.

Stocks climbed higher last Tuesday, led by the Nasdaq (0.6%), while the Dow (0.1%) was able to eke out a gain to extend its streak to 12 days. The Global Dow and the S&P 500 added 0.3%, while the Russell 2000 closed the day essentially where it began. Crude oil prices rose 1.1% to hit $79.61 per barrel. The yield on 10-year Treasuries settled at 3.91%. The dollar dipped lower, while gold prices advanced 0.2%.

As expected, last Wednesday the Federal Reserve raised interest rates 25.0 basis points (see below) to the highest range since 2001. Stocks closed the day with mixed results. The Dow gained 0.2%, notching its 13th consecutive day of gains, which is the longest winning streak for the Dow since 1987. The Russell 2000 (0.7%) and the Global Dow (0.3%) also posted gains, while the Nasdaq slipped 0.1%. The S&P 500 ended the day flat. Bond prices jumped higher, pulling yields lower. Ten-year Treasury yields fell 6.1 basis points to 3.85%. Crude oil prices reversed a rally, declining 0.9% to $78.95 per barrel. The dollar slipped lower, while gold prices rose for the second straight day.

The Dow’s winning streak ended at 13 days following last Thursday’s negative performance. The Russell 2000 fell 1.3%, the largest decline among the benchmark indexes listed here. The Dow slipped 0.7%, the S&P 500 and the Nasdaq fell 0.6%, while the Global Dow dropped 0.2%. Bond prices plunged lower, hiking yields on 10-year Treasuries 16.1 basis points to close at 4.01%. Crude oil prices jumped 1.4% to $79.91 per barrel. The dollar rose nearly 1.0%. Gold prices ended a mini two-day winning streak, declining 1.4% by the close of trading.

Stocks ended last week on a high note, fueled by favorable technology earnings and positive inflation data. Each of the benchmark indexes listed here posted solid gains last Friday, led by the Nasdaq (1.9%), followed by the Russell 2000 (1.4%), the S&P 500 (1.0%), and the Dow and the Global Dow (0.5%). Ten-year Treasury yields slid lower to close the day and week at 3.96%. Crude oil prices continued to climb, with prices per barrel eclipsing the $80.00 threshold for the first time since April. The dollar lost ground, while gold prices rose 0.6%.

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 Federal Reserve hiked the federal funds rate 25.0 basis points to 5.25%-5.50%. The statement released by the Fed contained virtually the same information as from its previous statement. Job gains have been robust, the economy has been expanding at a moderate pace, and inflation remains elevated. The Fed does not meet again until September.
• The economy accelerated at an annualized rate of 2.4% in the second quarter, according to the second estimate of gross domestic product. GDP increased 2.0% in the first quarter. Compared to the first quarter, the acceleration in GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in nonresidential (business) fixed investment. These movements were partly offset by a downturn in exports, and decelerations in consumer spending, federal government spending, and state and local government spending. Imports, which are a negative in the calculation of GDP, decreased. The personal consumption expenditures price index increased 2.6%, down from the 4.1% increase in the first quarter. Consumer spending rose 1.6% in the second quarter, following an increase of 4.2% in the first quarter.
• Consumer prices, as measured by the personal consumption expenditures price index, rose 0.2% in June. Prices less food and energy also increased 0,2% from May. Since June 2022, consumer prices are up 3.0%, the lowest yearly price increase since March 2021, when the advance was 2.5%. The PCE price index, the preferred measure of inflation for the Federal Reserve, is clearly ebbing but has yet to reach the 2.0% target rate of the Fed. Personal income and disposable personal income rose 0.3% last month. Consumer spending increased 0.5% in June.
• Durable goods orders rose 4.7% in June, marking the fourth straight month of increases. Transportation contributed to the increase in new orders for durable goods in June, increasing 12.1%. Also contributing to the June advance in new orders was nondefense aircraft and parts (69.4%), defense aircraft and parts (5.5%), and capital goods (11.2%). New orders for durable goods have increases 4.6% since June 2022.
• Sales of new single-family homes declined in June for the first time since February. According to the Census Bureau, new home sales dipped 2.5% last month, but were up 23.8% over June 2022. The median sales price in June was $415,400, while the average sales was $494,700. Inventory for new single-family homes for sale sat at a 7.4-month supply, based on the current pace of sales.
• The advance report on the international trade in goods deficit was $87.8 billion in June, down $4.0 billion, or 4.4%, from May. Exports of goods for June were $0.4 billion, or 0.2%, more than May exports. Imports of goods for June were $3.6 billion, or 2.7%, less than May imports. Over the last 12 months, exports are down 9.3%, and imports have dropped 9.9%.
• The national average retail price for regular gasoline was $3.596 per gallon on July 24, $0.037 per gallon higher than the prior week’s price but $0.734 less than a year ago. Also, as of July 24, the East Coast price increased $0.066 to $3.488 per gallon; the Midwest price declined $0.009 to $3.404 per gallon; the Gulf Coast price rose $0.106 to $3.243 per gallon; the Rocky Mountain price decreased $0.010 to $3.755 per gallon; and the West Coast price declined $0.010 to $4.539 per gallon.
• For the week ended July 22, there were 221,000 new claims for unemployment insurance, a decrease of 7,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 15 was 1.1%, 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 15 was 1,690,000, a decrease of 59,000 from the previous week’s level, which was revised down by 5,000. States and territories with the highest insured unemployment rates for the week ended July 8 were Connecticut (2.6%), New Jersey (2.5%), California (2.4%), Puerto Rico (2.4%), Rhode Island (2.2%), Massachusetts (2.0%), New York (1.9%), Oregon (1.9%), Minnesota (1.8%), and Pennsylvania (1.8%). The largest increases in initial claims for unemployment insurance for the week ended July 15 were in Georgia (+4,879), California (+3,875), South Carolina (+2,376), Oregon (+1,354), and Texas (+1,267), while the largest decreases were in Michigan (-3,620), Kentucky (-2,730), New Jersey (-2,036), New York (-1,917), and Indiana (-1,360).

Eye on the Week Ahead

Manufacturing and labor are the focus of this week’s economic data. The manufacturing sector slowed in June for the second straight month, while services expanded. Employment remained relatively strong in June, although the number of new hires (209,000) was well below the 2023 monthly average of 273,000.

The Markets (as of market close July 21, 2023)

Last week saw stocks close generally higher, with only the tech-heavy Nasdaq slipping lower. The Dow extended its winning streak to 10 straight sessions, its longest run since August 2017. Investors, probably anticipating another 25.0 basis-point hike from the Federal Reserve this week, moved from information technology, communication services, and consumer discretionary shares to more defensive sectors such as health care, utilities, and consumer staples. Long-term bond prices remained relatively stable for the week, with yields on 10-year Treasuries inching up 2.0 basis points. The dollar rebounded last week after sliding over 2.0% the prior week. The labor market remained strong, with jobless claims (see below) coming in lower than expected, which reduces the risk of recession and strengthens the dollar. Crude oil prices advanced again last week, keeping July’s streak of weekly increases intact.

Stocks opened higher to begin last week as investors looked ahead to the start of corporate earnings season. Traders looked past a disappointing report on China’s gross domestic product, instead focusing on hopes that waning inflation may quell fears of a recession. The small caps of the Russell 2000 gained 1.0% and the Nasdaq rose 0.9% to lead the benchmark indexes listed here. The S&P 500 advanced 0.4% and the Dow inched up 0.2%. The Global Dow ended the session flat. Ten-year Treasury yields fell 2.2 basis points to 3.79%. Crude oil prices slid 1.8%, falling to $74.09 per barrel on reports that Kuwait plans to boost its crude oil production. The dollar ended the day where it began, while gold prices dipped 0.3%.

Last Tuesday saw stocks close higher, with the Dow reaching a one-year high. Information technology, energy, and financials led the market sectors. A couple of major financial corporations posted favorable earnings to help propel bank shares. The Russell 2000 led the benchmark indexes for the second straight session, gaining 1.3%, followed by the Dow (1.1%) and the Nasdaq (0.8%). The Global Dow and the S&P 500 advanced 0.7%. Ten-year Treasury yields ticked lower, closing at 3.78%. Crude oil prices shrugged off the prior day’s declines, gaining 2.1% to settle at $75.71 per barrel. The dollar inched higher, while gold prices rose 1.3%.

Stocks finished higher last Wednesday for the third straight session. Tech shares lagged a bit, but consumer staples, financials, energy, and health care advanced. The Nasdaq ended the day flat, while the Russell 2000 (0.5%), the Dow (0.3%).The Global Dow and the S&P 500 edged 0.2% higher. Data in the United Kingdom showed inflation slowed somewhat, which impacted long-term bonds. The yield on 10-year Treasuries fell 4.7 basis points, closing at 3.74%. Crude oil prices continued to ride a bumpy wave, following the prior day’s advance by sliding 0.6% settling at $75.27 per barrel. The dollar edged higher, while gold prices were unchanged by the close of trading.

Wall Street closed generally lower last Thursday. The Dow advanced for the ninth straight session after gaining 0.5%, marking its longest winning streak since 2017. The Nasdaq (-2.1%), the Russell 2000 (-1.0%), and the S&P 500 (-0.7%) declined. The Global Dow was flat. Consumer discretionary, information technology, and communication services lost ground, while health care, utilities, and energy were strong performers. Ten-year Treasury yields, pushed higher by sagging bond prices, climbed 11.2 basis points to close at 3.85%. Crude oil prices settled at $75.63 per barrel, up 0.4% on the day. The dollar advanced over 0.5%, while gold prices dipped lower.

Stocks ended last Friday with mixed returns. The Dow barely edged higher to maintain its bull run. Investors moved from information technology and communication services to more defensive sectors such as utilities and health care. The Nasdaq fell for the second consecutive day, falling 0.2%, while the small caps of the Russell 2000 dipped 0.4%. The Global Dow slid 0.2%. The S&P 500 ended the day relatively flat. Yields on 10-year Treasuries slipped lower, closing at 3.83%. Crude oil prices advanced 1.7%. The dollar inched up 0.2%, while gold prices fell 0.4% by the close of trading.

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

• Retail sales inched up 0.2% in June and rose 1.5% since June 2022. Retail trade sales also increased 0.2% last month and were up 0.5% from a year ago. Retailers that enjoyed solid June sales included furniture and home furnishing stores; electronics and appliance stores; clothing and clothing accessories stores; miscellaneous store retailers; and nonstore retailers. Sales at general merchandise stores and department stores along with gasoline station sales slipped the most in June.
• Industrial production edged down 0.5% in June, marking the second straight monthly decline. Manufacturing output dipped 0.3% last month, while mining and utilities fell 0.2% and 2.6%, respectively. Overall, total industrial production in June was 0.4% below its June 2022 level. Most major market groups posted declines in June. The indexes for nondurable manufacturing and durable manufacturing fell 0.6% and 0.1%, respectively.
• The number of residential building permits issued in June declined 3.7% from the May total and is 15.3% below the June 2022 figure. Issued building permits for single-family housing increased 2.2% in June. Housing starts decreased 8.0% last month and were 8.1% below the total from a year earlier. Single-family housing starts in June were 7.0% below the prior month’s rate. Home completions dipped 3.3% in June from May but were 5.5% above the June 2022 total. Single-family home completions in June dipped 2.8% below May’s figure.
• Sales of existing homes retreated 3.3% in June and 18.9% since June 2022. This year has not been a good one for sales of existing homes, as they are lower by 23.0% from the end of 2022. Total housing inventory sits at a 3.1-month supply at the current sales pace. The dearth of existing homes for sale coupled with rising mortgage rates has stifled sales. The median sales price for existing homes was $410,200 in June, the second-highest price all-time, just below the highest price of $413,800 in June 2022. Single-family home sales also fell last month, down 3.4% from May and 18.8% from a year earlier. The median price for single-family existing homes was $416,000 in June, down 1.2% from June 2022.
• The national average retail price for regular gasoline was $3.559 per gallon on July 17, $0.013 per gallon higher than the prior week’s price but $0.931 less than a year ago. Also, as of July 17, the East Coast price decreased $0.007 to $3.422 per gallon; the Midwest price increased $0.051 to $3.413 per gallon; the Gulf Coast price fell $0.015 to $3.137 per gallon; the Rocky Mountain price rose $0.017 to $3.765 per gallon; and the West Coast price increased $0.015 to $4.549 per gallon.
• For the week ended July 15, there were 228,000 new claims for unemployment insurance, a decrease 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 8 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 8 was 1,754,000, an increase of 33,000 from the previous week’s level, which was revised down by 8,000. States and territories with the highest insured unemployment rates for the week ended July 1 were Puerto Rico (2.4%), New Jersey (2.3%), California (2.1%), Connecticut (2.0%), Rhode Island (2.0%), Massachusetts (1.9%), New York (1.8%), Oregon (1.7%), Minnesota (1.6%), and Pennsylvania (1.6%). The largest increases in initial claims for unemployment insurance for the week ended July 8 were in New York (+8,043), Ohio (+1,783), Pennsylvania (+1,413), Iowa (+1,368), and Arizona (+1,118), while the largest decreases were in Connecticut (-3,538), New Jersey (-3,290), Michigan (-1,434), Minnesota (-758), and Rhode Island (-751).

Eye on the Week Ahead

This is a very noteworthy week for the release of important economic information. The initial estimate of second-quarter gross domestic product is released this week. The economy advanced at an annualized rate of 2.0% in the first quarter. Also out this week is the report on personal income and outlays, which includes the personal consumption expenditures price index, a preferred inflation indicator of the Federal Reserve. Prices inched up 0.1% in May and are expected to maintain a comparable pace in June. All of which leads to the July meeting of the Federal Open Market Committee. The FOMC passed on increasing interest rates following its June meeting, but the expectation is that the Committee will raise rates by at least 25.0 basis points in July.

The Markets (as of market close July 14, 2023)

Wall Street enjoyed a positive week of returns, with each of the benchmark indexes posting solid gains, despite a marginal downturn at the end of last week. The financial sector began releasing quarterly updates last Friday as investors focused on the state of the banking industry. A few major banks reported increasing profits in the second quarter, while more data will be released this week. The Russell 2000, the Global Dow, and the Nasdaq gained over 3.0% last week, while the S&P 500 and the Dow advanced over 2.3%. Ten-year Treasury yields fell 24.0 basis points as investors saw hope that inflation may be subsiding and the Federal Reserve may be nearing an end to its policy of interest rate hikes. Crude oil prices climbed higher last week, despite last Friday’s drop, which was the largest decline since the end of last month. The dollar slid lower and is now down 3.4% year to date. Gold prices, on the other hand, rose higher last week and are up more than 7.0% for the year.

Last Monday saw investors grab some apparent bargains, pushing stocks higher to begin the week. The Russell 2000 led the benchmark indexes listed here, climbing 1.6%. The Dow advanced 0.6%, while the Global Dow (0.4%), the S&P 500 (0.2%), and the Nasdaq (0.2%) ticked higher. Ten-year Treasury yields settled at 4.06% after falling 4.4 basis points on rising bond prices. Crude oil prices ended a streak of increases, dipping 0.9% to $73.21 per barrel. The dollar and gold prices began last week on a downturn.

Stocks closed higher for the second straight session last Tuesday as investors awaited the Wednesday release of the Consumer Price Index report. The Global Dow rose 1.1% to head the indexes listed here. The Russell 2000 enjoyed a second day of notable gains after advancing 1.0%. The Dow rose 0.9%, followed by the S&P 500 (0.7%), and the Nasdaq (0.6%). Crude oil prices reversed the prior day’s downturn, climbing 2.6% to settle at $74.86 per barrel. The yield on 10-year Treasuries slipped 2.6 basis points to close at 3.98%. The dollar declined, while gold prices advanced.

Signs that inflation may be receding drove stocks and bond prices higher last Wednesday. A better-than-expected Consumer Price Index (see below) offered encouragement to investors that the Federal Reserve’s interest rate hikes may be nearing an end. For the second day in a row, the Global Dow (1.4%) led the benchmark indexes listed here, followed by the Nasdaq (1.2%), the Russell 2000 (1.1%), the S&P 500 (0.7%), and the Dow (0.3%). With bond prices climbing higher, yields on 10-year Treasuries fell nearly 12.0 basis points to close at 3.86%. Crude oil prices rose 1.4% to $75.86 per barrel. The dollar continued to decline, while gold prices continued to advance.

Stocks rallied for a fourth straight day last Thursday, with the S&P 500 and the Nasdaq reaching new intraday 52-week highs. Tech stocks were some of the highest climbers helping to drive the indexes. The Nasdaq rose 1.6%, followed by the Global Dow (1.1%), the Russell 2000 and the S&P 500 (0.9%), and the Dow (0.1%). Bond prices continued to climb, pulling yields lower. Ten-year Treasury yields fell 10.0 basis points to settle at 3.76%. Crude oil prices advanced for the third straight day, reaching $77.31 per barrel. The dollar continued to slide, falling 0.8%. Gold prices inched up 0.2%.

Last Friday saw stocks close generally lower, with only the Dow posting a 0.3% gain among the benchmark indexes listed here. The Russell 2000 fell 1.0%, the Global Dow dipped 0.5%, the Nasdaq slipped 0.2%, and the S&P 500 declined 0.1%. Ten-year Treasury yields rose 5.8 basis points. The dollar advanced for the only day last week, while gold prices fell. Crude oil prices dropped 2.2% to $75.23 per barrel.

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 0.2% in June after advancing 0.1% in May. Shelter prices (0.4%) accounted for over 70% of the CPI increase in June. Also advancing in June were prices for motor vehicles, insurance, apparel, recreation, and personal care. Prices for airline fares, communication, used cars and trucks, and household furnishings and operations were among those that decreased last month. Prices less food and energy rose 0.2% in June, the smallest one-month increase since August 2021. Over the last 12 months, the CPI rose 3.0%, which is the smallest yearly increase since the period ended March 2021. The CPI less food and energy rose 4.8% over the last 12 months. Energy prices decreased 16.7% for the 12 months ended in June, while the food prices increased 5.7%.
• Producer prices inched up 0.1% in June after declining 0.4% in the previous month. Since June 2022, Producer prices have risen 0.1%. Pushing producer prices higher was a 0.2% increase in prices for services. Prices for goods were unchanged in June. producer prices less foods, energy, and trade services moved up 0.1% in June after no change in May. For the 12 months ended in June, producer prices less foods, energy, and trade services advanced 2.6%.
• Import and export prices continued to decline in June. According to the latest report from the Bureau of Labor Statistics, import prices fell 0.2% in June after decreasing 0.4% in May. Export prices declined 0.9% in June following a 1.9% drop the previous month. In 2003, import prices have fallen in five of the last six months after rising 3.2% in 2022. Import prices declined 6.1% thus far this year, the largest 12-month drop since the year ended May 2020. Export prices fell 12.0% from June 2022 to June 2023, the largest 12-month decline since the data was first published in September 1984.
• The Treasury budget deficit was $227.8 billion in June, a decrease of about $12.6 billion from the May deficit but $139.0 billion above the June 2022 deficit. Through the first nine months of the fiscal year, the government deficit sits at $1.392.6 trillion compared to $515.1 billion over the same period in the prior fiscal year. Compared to last fiscal year, government receipts are down $422.8 billion, while government expenditures rose by $454.7 billion.
• The national average retail price for regular gasoline was $3.546 per gallon on July 10, $0.019 per gallon hither than the prior week’s price but $1.100 less than a year ago. Also, as of July 10, the East Coast price increased $0.057 to $3.429 per gallon; the Midwest price fell $0.027 to $3.362 per gallon; the Gulf Coast price rose $0.044 to $3.152 per gallon; the Rocky Mountain price declined $0.042 to $3.748 per gallon; and the West Coast price inched up $0.001 to $4.534 per gallon. The U.S. Energy Information Administration forecasts higher oil prices in the second half of 2023 and into 2024. EIA expects production cuts from OPEC members and higher demand, which will likely drive Brent crude oil prices to the mid $80.00 per barrel range by the end of 2024.
• For the week ended July 8, there were 237,000 new claims for unemployment insurance, a decrease of 12,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 1 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 1 was 1,729,000, an increase of 11,000 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 June 24 were California (2.2%), New Jersey (2.2%), Puerto Rico (2.2%), Massachusetts (1.9%), Connecticut (1.8%), Rhode Island (1.8%), New York (1.7%), Oregon (1.7%), Pennsylvania (1.7%), and Minnesota (1.6%). The largest increases in initial claims for unemployment insurance for the week ended July 1 were in Michigan (+6,792), New York (+4,152), Ohio (+3,028), Kentucky (+2,449), and Indiana (+1,549), while the largest decreases were in Texas (-3,126), New Jersey (-1,137), Colorado (-509), Wisconsin (-504), and Connecticut (-446).

Eye on the Week Ahead

The June retail sales report is released this week. May saw retail sales increase by 0.3% from the previous month. The June report on industrial production is also out this week. Industrial production has been somewhat flat over the past few months, decreasing 0.2% in May. June reports on housing starts and existing home sales are available this week. In general, new home sales have increased throughout the year, while sales of existing homes have declined, primarily due to rising mortgage rates and a dearth of inventory.

The Markets (as of market close July 7, 2023)

Stocks fell for the second straight week, with each of the benchmark indexes losing ground. The Dow led the declines, followed by the Global Dow, the Russell 2000, the S&P 500, and the Nasdaq. Although the employment report for June (see below) showed a moderate decline in the number of new jobs added, wages continued to track higher, which could support further interest rate hikes by the Federal Reserve. The Fed meets next on July 26, and the latest employment data makes another pause in rate increases highly unlikely. Whether the rate hike is 25.0 basis points or 50.0 basis points is open to conjecture. Crude oil prices advanced for the second straight week as export cuts by Saudi Arabia and Russia began to impact prices. Ten-year Treasury yields increased by 24.0 basis points, impacted by the weakest number of new job hires in three years and rising wages.

As expected, trading was light last Monday before the fourth of July holiday. Nevertheless, stocks managed to post moderate gains, with each of the benchmark indexes listed here adding value, led by the Global Dow (0.5%), followed by the Russell 2000 (0.4%), the Nasdaq (0.2%), and the S&P 500 (0.1%). The Dow closed the session where it began. Ten-year Treasury yields inched up to 3.85% after adding 3.9 basis points. Crude oil prices fell 1.2% to $69.79 per barrel, despite fresh production cuts by Saudi Arabia and Russia. The dollar and gold prices edged higher.

Stocks declined last Wednesday as investors digested the minutes from the Federal Reserve’s June meeting and a sharp decline in services activity in China. The Russell 2000 slid 1.3%, followed by the Global Dow (-0.6%), and the Dow (-0.4%). The S&P 500 and the Nasdaq dipped 0.2%. Crude oil prices jumped 3.0%, settling at $71.88 per barrel. The dollar edged higher, while gold prices declined. Ten-year Treasury yields rose 8.7 basis points to 3.94%.

Equities got off to a slow start last Thursday. The Fed got more ammunition to continue to hike interest rates, following a better-than-expected ADP employment report. The Russell 2000 and the Global Dow fell 1.6%, the Dow dropped 1.1%, while the Nasdaq and the S&P 500 slid 0.8%. Ten-year Treasury yields gained 9.6 basis points, closing at 4.04%. Crude oil prices were flat, while the dollar and gold prices slid lower.

Last Friday saw stocks close mostly lower, with only the Russell 2000 (1.22%) and the Global Dow (0.40%) ending the session higher. The Dow lost 0.6%, the S&P 500 fell 0.3%, and the Nasdaq dipped 0.1%. Crude oil prices jumped 2.6% to close at $73.66 per barrel. The dollar slid lower, while gold prices advanced 0.8%. Ten-year Treasury yields were flat 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

• Employment slowed somewhat in June. There were 209,000 new jobs added last month, down from the 2023 average of 278,000 per month, and well off the monthly average of 399,000 since May 2022. In May, employment continued to trend up in government, health care, social assistance, and construction. Both the unemployment rate, at 3.6%, and the number of unemployed persons, at 6.0 million, changed little in June. The unemployment rate has ranged from 3.4% to 3.7% since March 2022. The labor force participation rate, at 62.6%, and the employment-population ratio, at 60.3%, were unchanged in May from the previous month. In June, average hourly earnings rose by $0.12, or 0.4%, to $33.58. Over the past 12 months, average hourly earnings have increased by 4.4%. The average workweek edged up by 0.1 hour to 34.4 hours in June.
• According to the latest Job Openings and Labor Turnover Summary (JOLTS), the number of job openings fell 496,000 to 9.8 million in May. In May, the largest decreases in job openings were in health care and social assistance (-285,000), finance and insurance (-139,000), and other services (-78,000). Job openings increased in educational services (+45,000), state and local government education (+37,000), and federal government (+24,000). The number of hires increased by 107,000 in May, with hires in durable goods manufacturing increasing by 41,000. Total separations include quits, layoffs and discharges, and other separations. Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. The number of total separations increased 211,000 in May. The number of quits increased 250,000 to 4.0 million.
• Manufacturing contracted for the second straight month in June, according to the latest survey from S&P Global. The S&P Global US Manufacturing Purchasing Managers’ Index™ posted 46.3 in June, down from 48.4 in May. Manufacturing has declined in seven of the last eight months. A sharper decline in new orders caused manufacturing output to decrease. Survey respondents generally attributed the decline in demand to inflationary pressure and higher interest rates.
• Unlike the manufacturing sector, services expanded in June. According to the latest purchasing managers’ index from S&P Global, new orders increased for the fourth straight month. The June PMI™, at 54.4, rose at the second-fastest pace in over a year. Survey respondents were more upbeat in their expectations for the remainder of the year and sought to expand employment accordingly. Even with the expansion, higher interest rates and increased wage demands pushed cost burdens higher for service providers. Nevertheless, in an attempt to remain competitive, selling prices increased at the slowest rate since February.
• The goods and services trade deficit decreased by $5.5 billion to $69.0 billion in April. Exports fell 0.8%, while imports declined 2.3%. Year to date, the goods and services deficit decreased $101.7 billion, or 22.8%, from the same period in 2022. Exports increased $48.0 billion, or 3.9%. Imports decreased $53.7 billion, or 3.2%.
• The national average retail price for regular gasoline was $3.527 per gallon on July 3, $0.044 per gallon lower than the prior week’s price and $1.244 less than a year ago. Also, as of July 3, the East Coast price decreased $0.033 to $3.372 per gallon; the Midwest price fell $0.063 to $3.389 per gallon; the Gulf Coast price decreased $0.082 to $3.108 per gallon; the Rocky Mountain price rose $0.056 to $3.790 per gallon; and the West Coast price dipped $0.023 to $4.533 per gallon.
• For the week ended July 1, there were 248,000 new claims for unemployment insurance, an increase of 12,000 from the previous week’s level, which was revised down by 3,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 24 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 24 was 1,720,000, a decrease of 13,000 from the previous week’s level, which was revised down by 9,000. States and territories with the highest insured unemployment rates for the week ended June 17 were California (2.2%), New Jersey (2.1%), Puerto Rico (2.1%), Massachusetts (1.8%), New York (1.6%), Oregon (1.6%), Pennsylvania (1.6%), Illinois (1.5%), Minnesota (1.5%), and Rhode Island (1.5%). The largest increases in initial claims for unemployment insurance for the week ended June 24 were in New Jersey (+5,306), Ohio (+2,359), Connecticut (+2,096), Rhode Island (+927), and Oregon (+711), while the largest decreases were in California (-10,956), Texas (-8,962), Pennsylvania (-3,199), Minnesota (-2,490), and Puerto Rico (-1,280).

Eye on the Week Ahead

Quite a bit of attention will be focused on the Consumer Price Index and the Producer Price Index, which are released this week. The CPI inched up 0.1% in May and 4.0% for the year. The PPI declined 0.3% in May and was up only 1.1% for the 12 months ended in May.

The Markets (second quarter through June 30, 2023)

Wall Street proved resilient during the second quarter of the year, despite rising inflation, two interest rate hikes, and concerns about the debt ceiling. The economy remained relatively strong, despite predictions that it may be headed toward a recession. The second quarter saw information technology, communication services, and consumer discretionary account for most of the market gains. Energy, utilities, health care, financials, and consumer staples slid lower. The market’s positive performance during the second quarter was buoyed by strength in the labor market, economic data that may be showing inflation is beginning to wane, and a better-than-expected first-quarter gross domestic product.

Government bond yields rose in the second quarter, with investors eyeing the relative strength of the economy as reason to remain bullish on stocks. Each of the benchmark indexes listed here climbed higher in the second quarter, with the Nasdaq enjoying its third-best first half on record, a far cry from last year at this time, when the tech-heavy index was going through its second-worst six-month stretch. The S&P 500 also enjoyed notable growth in the second quarter. The dollar inched higher while gold prices retreated in the second quarter. Notwithstanding a roughly 4.0% increase in June, crude oil prices declined for the fourth consecutive quarter, marking the longest losing streak since 1988. While indications seem to point to a more bullish outlook, crude oil supply continued to outpace demand, muting prices. OPEC+ cuts were offset by production increases from other sources, including the United States. In addition, China’s demand has been weaker than anticipated, with manufacturing slow to expand. Prices at the pump rose in the second quarter. The June 26 retail price for regular gasoline was $3.571 per gallon, $0.15 above the March price of $3.421 per gallon. However, gas prices are down $1.301 over the last 12 months.

April began the quarter with stocks posting modest gains from the previous month. The large caps of the Dow (2.5%) and the S&P 500 (1.5%) were bolstered by a rally over the last two days of the month. Small caps declined further with the Russell 2000 falling 1.9%, while remaining marginally ahead of its 2022 year-end value. Among the market sectors in April, industrials underperformed, while communication services fared the best. Data in April showed some signs of economic weakening. Job growth in April (236,000), was well below the monthly average for the year, while the number of workers receiving unemployment insurance reached its highest level since November 2021. Housing data was soft, with the number of residential building permits and housing starts sagging from the previous month. Existing home sales dropped, while the median existing-homes sales price was 0.9% less than a year ago. Financials took a hit after another bank fell into Federal Deposit Insurance Corporation receivership. Despite some economic downturns, other data supported ongoing economic strength and bolstered investor sentiment. First-quarter corporate earnings were somewhat better than expected. The Consumer Price Index inched up only 0.1%, bringing the year-over-year increase to 5.0%, the lowest annual pace since May 2021.

Stocks were mixed in May, with information technology and communication services pushing the Nasdaq up nearly 6.0%, while the Dow lost 3.5%. The S&P 500 inched up 0.3%, but the small caps of the Russell 2000 fell 1.1%. Like the previous month, relatively strong corporate earnings reports and encouraging inflation data helped keep investors in the market. Bond prices slid lower, pushing yields higher, with 10-year Treasuries climbing 18.0 basis points in May. Stocks began the month on a downturn after the Federal Reserve hiked interest rate 25.0 basis points, while giving no clear indication as to whether or when more rate hikes were coming. For much of the month, investors focused on the debt ceiling negotiations between President Biden and House Speaker McCarthy. Mega-cap technology and artificial intelligence stocks dominated the market for much of May. Inflation remained elevated, with the personal consumption expenditures price (PCE) index, a preferred inflation indicator of the Federal Reserve, rising 4.3% for the year, while consumer prices excluding food and energy rose 4.7%.

June was a strong month for stocks, with each of the benchmark indexes listed here posting gains of between 4.6% and 8.0%. Inflationary pressures showed signs of cooling, with the 12-month PCE price index coming in at 3.8%. The Consumer Price Index rose 4.0% for the year, the smallest 12-month increase since the comparable period ended March 2021. The Federal Reserve elected not to increase interest rates in June, opting, instead, to step back and assess additional information and its implications for monetary policy. Gross domestic product advanced at a stronger-than-expected 2.0% for the first quarter, showing resilience in the economy. Despite the collapse of several major U.S. banks, the Federal Reserve indicated that the largest domestic banks are sufficiently positioned to continue lending to households and businesses even during a severe recession. The labor market picked up the pace, adding nearly 340,000 new jobs, in line with the average monthly gain over the past 12 months. Industrial production declined minimally, following two consecutive monthly increases. While manufacturing slowed, business activity in the services sector expanded at the fastest rate since April 2022. Long-term bond yields increased in June from May, as bond 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.

Latest Economic Reports

• Employment: Employment rose by 339,000 in May from April, in line with an average monthly gain of 341,000 over the prior 12 months. In May, employment continued to trend upward in professional and business services, health care, government, construction, transportation and warehousing, and social assistance. The unemployment rate rose 0.3 percentage point to 3.7%. In May, the number of unemployed persons rose by 440,000 to 6.1 million. The employment-population ratio, at 60.3%, and the labor force participation rate, at 62.6%, were little changed from the previous month. Both measures have shown little net change since early 2022. In May, average hourly earnings increased by $0.11, or 0.3%, to $33.44. Over the past 12 months ended in May, average hourly earnings rose by 4.3%. The average workweek edged down 0.1 hour to 34.3 hours.
• There were 239,000 initial claims for unemployment insurance for the week ended June 24, 2023. The total number of workers receiving unemployment insurance was 1,742,000. By comparison, over the same period last year, there were 213,000 initial claims for unemployment insurance, and the total number of claims paid was 1,340,000.
• FOMC/interest rates: The Federal Open Market Committee maintained the federal funds target range rate at the current 5.00%-5.25% in June. The Committee essentially decided to assess the effects of prior rate increases. However, the FOMC indicated that more rate hikes are likely, noting that inflation remained elevated, while economic activity expanded at a modest pace and job gains have been robust. Overall, the FOMC will base its decisions on available data, and “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” The summary of economic projections has the federal funds rate at 5.6% in June from 5.1% in March, which suggests the fed interest rate will be increased by 50.0 basis points by the end of 2023.
• GDP/budget: Economic growth slowed minimally in the first quarter, as gross domestic product increased 2.0%, according to the third and final estimate from the Bureau of Economic Analysis. GDP rose 2.6% in the fourth quarter. The deceleration in first-quarter GDP compared to the previous quarter primarily reflected downturns in private inventory investment and residential fixed investment. Consumer spending, as measured by personal consumption expenditures, rose 4.2% in the first quarter compared to a 1.0% increase in the fourth quarter. Consumer spending on long-lasting durable goods jumped 16.3% in the first quarter after decreasing 1.3% in the prior quarter. Spending on services rose 3.2% (1.6% in the fourth quarter). Nonresidential fixed investment increased 0.6% after climbing 4.0% in the fourth quarter. Residential fixed investment fell 4.0% in the first quarter, significantly better than the 25.1% decrease in the fourth quarter. Exports increased 7.8% in the first quarter, following a decrease of 3.7% in the fourth quarter. Imports, which are a negative in the calculation of GDP, increased 2.0% in the first quarter after declining 5.5% in the previous quarter. Consumer prices increased 4.1% in the first quarter compared to a 3.7% advance in the fourth quarter. Excluding food and energy, consumer prices advanced 4.9% in the first quarter (4.4% in the fourth quarter).
• The federal budget had a $240.3 billion deficit in May, well above the May 2022 deficit of $66.2 billion. The deficit for the first eight months of fiscal year 2023, at $1,164.9 trillion, is much higher than the $426.2 billion deficit over the same period of the previous fiscal year. In May, government receipts totaled $307.5 billion for the month and $3.0 trillion for the current fiscal year. Government outlays were $547.8 billion in May and $4.2 trillion through the first eight months of fiscal year 2023. By comparison, receipts in May 2022 were $389.0 billion and $3.4 trillion through the first eight months of the previous fiscal year. Expenditures were $455.2 billion in May 2022 and $3.8 trillion through the comparable period in FY22.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report, the personal consumption expenditures price index edged up 0.1% in May and 3.8% since May 2022. Prices excluding food and energy advanced 0.3% in May, following increases of 0.4% in April and 0.3% in March. Prices for goods decreased 0.1%, while prices for services increased 0.3%. Food prices increased 0.1% and energy prices decreased 3.9%. Since May 2022, consumer prices for food increased 5.8%, while energy prices declined 13.4%. Personal income rose 0.4% in May, 0.1 percentage point greater than the April increase. Disposable personal income increased 0.4% in May after advancing 0.3% in April. Consumer spending increased 0.1% in May, after rising 0.6% in the previous month.
• The Consumer Price Index rose 0.1% in May after increasing 0.4% in April. Over the 12 months ended in May, the CPI advanced 4.0%, down from 4.9% for the year ended in April. Excluding food and energy prices, the CPI rose 0.4% in May and 5.3% over the last 12 months. Contributing to the May CPI advance were increases in prices for shelter (0.6%) and used cars and trucks (4.4%). In May, food prices increased 0.2% and 6.7% since May 2022. Energy prices fell 3.6% in May and are down 11.7% over the 12 months ended in May.
• Prices that producers received for goods and services decreased 0.3% in May, following a 0.2% increase in the previous month. Producer prices increased 1.1% for the 12 months ended in May. The Producer Price Index saw prices for goods fall 1.6%, while prices for services increased 0.2%. Producer prices less foods, energy, and trade services were unchanged in May after increasing 0.1% in the previous month. Prices less foods, energy, and trade services advanced 2.8% for the year ended in May after increasing 3.3% from the 12 months ended in April.
• Housing: Sales of existing homes increased 0.2% in May. Since May 2022, existing-home sales dropped 12.7%. According to the report from the National Association of Realtors®, job gains, a dearth of inventory, and fluctuating mortgage rates have contributed to the decline in sales of existing homes. The median existing-home price was $396,100 in May, up from $385,900 in April but lower than the May 2022 price of $408,600. In May, unsold inventory of existing homes represented a 3.0-month supply at the current sales pace, up from the April pace of 2.9 months. Sales of existing single-family homes dropped 0.3% in May and 20.0% from May 2022. The median existing single-family home price was $401,100 in May, up from the April price of $390,200 but well below the May 2022 price of $415,400.
• New single-family home sales advanced in May, climbing 12.2%, marking the third consecutive monthly increase. Sales were up 20.0% from a year earlier. The median sales price of new single-family houses sold in May was $416,300 ($402,400 in April). The May average sales price was $487,300 ($495,600 in April). The inventory of new single-family homes for sale in May decreased to 6.7 months, down from 7.6 months in April.
• Manufacturing: Industrial production declined 0.2% in May after increasing 0.5% the previous month. Manufacturing increased 0.1% in May, bolstered by 0.3% increase in durables, which was offset by a 0.1% decrease in noondurables. In May, mining fell 0.4%, while utilities dropped 1.8%.The decrease in mining was driven primarily by decreases in coal mining and support activities (in particular, oil and gas well drilling).The output of utilities declined for the second consecutive month, as electric utilities fell in May, while natural gas utilities remained unchanged. Total industrial production in May was 0.2% above its year-earlier level. Major market groups posted mixed results in May. Notable gains were recorded in defense and space equipment and construction supplies. Most other major market groups recorded modest declines.
• New orders for durable goods increased 1.7% in May after increasing 1.2% in April. New orders for transportation equipment led the overall increase, advancing 3.9% in May, marking the third consecutive monthly advance. Excluding transportation, new orders increased 0.6% in May. Excluding defense, new orders rose 3.0%. Over the past 12 months, new orders for durable goods have increased 3.5%.
• Imports and exports: May saw both import and export prices decrease. Import prices fell 0.6%, following a 0.3% increase in April. Prices for imports declined 5.9% over the past year, the largest 12-month drop since the index declined 6.3% for the 12 months ended in May 2020. Import fuel prices decreased 6.4% in May, following a 4.1% jump in April. The May decline in import fuel prices was the largest monthly drop since August 2022. Nonfuel import prices edged down 0.1% in May after being unchanged in the previous month. Lower prices in May for nonfuel industrial supplies and materials and foods, feeds, and beverages more than offset higher prices for automotive vehicles and capital goods. Nonfuel import prices declined 1.6% over the past year. Export prices dropped 1.9% in May, the largest monthly decrease since December 2022. Falling prices for both agricultural and nonagricultural exports contributed to the overall decline in export prices in May. Export prices fell 10.1% for the year ended in May, the largest 12-month decline since the series was first published in September 1984.
• The international trade in goods deficit fell $6.0 billion, or 6.1%, in May over April. Exports of goods for May were $1.0 billion, or 0.6%, below April exports. Imports of goods were $6.9 billion, or 2.7%, less than April imports. The May decrease in exports was mainly attributable to declines in other goods (-13.2%) and foods, feeds, and beverages (-14.2%). The decrease in May imports was largely driven by a 7.3% decline in consumer goods.
• The latest information on international trade in goods and services, released June 7, was for April and revealed that the goods and services trade deficit was $74.6 billion, an increase of 23.0% from the March deficit. April exports were $249.0 billion, 3.6% less than March exports. April imports were $323.6 billion, 1.5% above March imports. For the 12 months ended in April, the goods and services deficit decreased 23.9%. Exports increased 5.8%, while imports decreased 2.3%.
• International markets: China’s post-pandemic economic recovery showed new signs of weakness in June. Manufacturing in China contracted for the third straight month in June, while the services sector also weakened. The latest data likely prompted the Chinese government to lower the one-year loan prime rate by 10 basis points. With inflationary pressures continuing to rise, the Bank of England hiked interest rates by 50 basis points in June, marking the 13th consecutive interest rate increase. Elsewhere, in Germany, manufacturing declined in both goods and services sectors. What was often the fulcrum of the German economy, weak global demand has impacted German exports. For June, the STOXX Europe 600 Index was flat; the United Kingdom’s FTSE slid 0.8%; Japan’s Nikkei 225 Index gained 5.3%; and China’s Shanghai Composite Index dipped 0.9%.
• Consumer confidence: The Conference Board Consumer Confidence Index® increased in June to 109.7, up from a revised 102.5 in May. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, rose to 155.3 in June, higher than the May reading of 148.9. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, advanced to 79.3 in June from 71.5 in May. According to the Conference Board’s report, the Expectations Index has remained below 80.0, the level associated with a recession within the next year, since February 2022, with the exception of a brief uptick in December 2022. However, June’s reading was just a shade below 80.0 and up sharply from prior month’s rate.

Eye on the Quarter Ahead

During the third quarter, investors will likely focus on inflation data and the Federal Reserve’s response. Concerns over slowing economic activity, both here and globally, also will influence the market going forward.

The Markets (as of market close June 30, 2023)

Stocks moved higher last week as favorable inflation data added to investor hopes that the Federal Reserve would relax its monetary policy, despite Fed Chair Powell’s statement that at least two more rate hikes are in the offing prior to the end of the year. The small caps of the Russell 2000 performed the best, followed by the S&P 500, the Global Dow, the Nasdaq, and the Dow. Bond prices declined as investors focused on stocks. The dollar inched higher, while gold prices fell for the third straight week. Crude oil prices closed higher, following the prior week’s plunge.

The last week of June picked up where the prior week left off with the market in a bit of a tailspin. Last Monday saw the Nasdaq fall 1.2% and the S&P 500 slide 0.5% as communication services, consumer discretionary, and information technology dragged the indexes lower. The Dow and the Global Dow were flat, while the Russell 2000 eked out a 0.1% gain. Ten-year Treasury yields fell 2.0 basis points to settle at 3.71%. Crude oil prices rose about 0.6% to end the session at about $69.59 per barrel. The dollar dipped lower, while gold prices inched higher.

Stocks ended their losing streak last Tuesday as each of the benchmark indexes listed here posted gains. Investors received encouraging economic data with better-than-expected reports on consumer confidence and new home sales. The Nasdaq (1.7%) and the Russell 2000 (1.5%) led the indexes, followed by the S&P 500 (1.2%), the Global Dow (0.9%), and the Dow (0.6%). Bond prices slid lower, pushing yields higher, with 10-year Treasury yields climbing to 3.76%. Crude oil prices fell 2.3%, settling at $67.76 per barrel. The dollar and gold prices declined.

In a day marked by volatile trading, Wall Street ended last Wednesday with mixed results. The Russell 2000 gained 0.5%, while the Nasdaq and the Global Dow rose 0.3%. The large caps of the Dow and the S&P 500 slipped minimally. The yield on 10-year Treasuries fell 5.8 basis points to 3.71%. Crude oil prices jumped 2.2% to close at about $69.18 per barrel. The dollar advanced nearly 0.5%, while gold prices declined.

Stocks closed mostly higher last Thursday. Most of the benchmark indexes posted gains, despite Federal Reserve Chair Jerome Powell’s assertion that interest rates will be increased at least two more times this year. Powell noted that inflation continues to run high and that culling it back to the 2.0% target has a long way to go. By the close of trading, the small caps of the Russell 2000 gained 1.2%, followed by the Dow (0.8%), the S&P 500 (0.5%), and the Global Dow (0.2%). The Nasdaq ended the day flat. Ten-year Treasury yields jumped to 3.85% after adding 14.4 basis points. Crude oil prices advanced for the second straight day, closing at about $69.81 per barrel. The dollar moved higher, while gold prices fell for the third consecutive session.

Wall Street closed higher last Friday, with each of the benchmark indexes listed here securing positive returns. The Nasdaq (1.5%) led the way, followed by the S&P 500 (1.2%), the Global Dow (1.0%), the Dow (0.8%), and the Russell 2000 (0.4%). Ten-year Treasury yields fell 3.5 basis points to close the day and the week at 3.81%. Crude oil prices increased for the third consecutive day after gaining 0.9%. The dollar slid lower, while gold prices advanced, ending a brief three-day downturn.

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 economy expanded at an annualized rate of 2.0%, according to the third and final estimate of first-quarter gross domestic product. GDP expanded at an annualized rate of 2.6% in the fourth quarter of 2022. Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment that was partly offset by an acceleration in consumer spending, an upturn in exports, and a smaller decrease in residential fixed investment. Imports climbed higher. The personal consumption expenditures (PCE) price index increased 4.1%, revised down 0.1 percentage point. The PCE price index excluding food and energy prices increased 4.9%, a downward revision of 0.1 percentage point from the fourth quarter.
• Personal income and disposable (after-tax) income rose 0.4% in May, according to the latest report from the Bureau of Economic Analysis. Consumer spending inched up 0.1%, after rising 0.6% in April. Consumer prices for goods and services advanced 0.1% in May, following a 0.4% increase in April. Consumer prices, excluding food and energy rose 0.3%. Over the last 12 months, consumer prices have increased 3.8%, while prices less food and energy rose 4.6%.
• New orders for manufactured durable goods rose for the third consecutive month in May, after climbing 1.7%. Transportation equipment, also up three consecutive months, led the increase, up 3.9% in May. Excluding transportation, new orders increased 0.6%. Excluding defense, new orders increased 3.0%. New orders for capital goods advanced 2.8% in May, bolstered by new orders for nondefense capital goods, which rose 6.7%. New orders for defense capital goods fell 14.7% in May.
• Sales of new single-family homes rose for the third straight month after increasing 12.2% in May. The median sales price of new houses sold in May 2023 was $416,300. The average sales price was $487,300. Inventory for available new single-family homes for sale sat at a 6.7-month supply at the current sales pace.
• The advance report on the international trade in goods balance for May showed a 6.1% decline in the trade deficit from the prior month. Exports fell 0.6%, while imports decreased 2.7%.
• The national average retail price for regular gasoline was $3.571 per gallon on June 26, $0.006 per gallon lower than the prior week’s price and $1.301 less than a year ago. Also, as of June 26, the East Coast price decreased $0.014 to $3.405 per gallon; the Midwest price fell $0.037 to $3.452 per gallon; the Gulf Coast price increased $0.081 to $3.190 per gallon; the Rocky Mountain price rose $0.013 to $3.734 per gallon; and the West Coast price dipped $0.013 to $4.556 per gallon.
• For the week ended June 24, there were 239,000 new claims for unemployment insurance, a decrease of 26,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 17 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 17 was 1,742,000, a decrease of 19,000 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 June 10 were California (2.3%), New Jersey (2.1%), Massachusetts (1.8%), Puerto Rico (1.8%), New York (1.6%), Oregon (1.6%), Illinois (1.5%), Pennsylvania (1.5%), Rhode Island (1.5%), and Washington (1.5%). The largest increases in initial claims for unemployment insurance for the week ended June 17 were in California (+6,279), New Jersey (+2,412), Connecticut (+1,888), Texas (+1,636), and Puerto Rico (+1,288), while the largest decreases were in Georgia (-2,162), Indiana (-1,983), Missouri (-1,794), South Carolina (-1,672), and Minnesota (-1,576).

Eye on the Week Ahead

The employment figures for June are out this week. The labor sector has continued to show strength this year, averaging nearly 290,000 new jobs per month. Also out this week are the results from the monthly survey of purchasing managers for manufacturing and services. May saw manufacturing slip, while services expanded.