What I’m Watching This Week – 2 August 2021

The Markets (as of market close July 30, 2021)

Equities retreated last week despite strong corporate earnings data. European and Asian stocks slid following China’s regulatory crackdown aimed at large tech companies. Although corporate earnings generally have been solid, last Friday’s lower-than-expected earnings results from some heavily weighted megacaps may have caused some uncertainty about the pace of economic growth. By the close of last week, tech shares fell, pulling the Nasdaq down 1.1%, with the large caps of the Dow and the S&P 500 each declining 0.4%. The small caps of the Russell 2000 climbed 0.8%, while the Global Dow rose 0.4%. Crude oil prices climbed 2.4% to $73.81 per barrel. Gold prices rose nearly 1.0%, while the dollar dipped 0.8%. The yield on 10-year Treasuries decreased 5 basis points. Materials (2.8%) and energy (1.6%) led the market sectors.

Last week began with each of the benchmark indexes posting gains on Monday, as concerns over the resurgent spread of the coronavirus were outweighed by a positive start to corporate earnings season. The Global Dow added 0.7%, followed by the Russell 2000, which edged up 0.3%. The large caps of the Dow and the S&P 500 each gained 0.2%, while the Nasdaq ticked up by less than 0.1%. Treasury yields and the dollar dipped. Crude oil prices climbed marginally higher. The market sectors were mixed, with energy the clear mover after advancing 2.5%. Among the remaining sectors, communication services, consumer discretionary, and materials gained between 0.7% and 0.9%.

The market reversed course last Tuesday as megacap technology stocks tumbled. The Nasdaq posted its largest decline in nearly two months after slipping 1.2%. The S&P 500 fell 0.5%, while the Dow dipped 0.2%. The small caps of the Russell 2000 lost 1.1% and the Global Dow declined 0.2%. Several global markets dipped lower following China’s imposition of a regulatory campaign aimed at the country’s largest tech companies. The drop in tech stocks in China may be having a carryover effect on similar stocks in the United States. The sectors finished mostly lower, with information technology and energy falling 1.0%, while consumer discretionary fell 1.2%. Treasury yields, the dollar, and crude oil prices fell.

Stocks closed last Wednesday mixed, with the Russell 2000 (1.5%), the Nasdaq (0.7%), and the Global Dow (0.1%) edging higher, while the large caps of the Dow fell 0.4%. The S&P 500 ended the day essentially unchanged. The dollar dipped lower, while Treasury yields and crude oil prices rose. Energy and communication services led the market sectors, while consumer staples fell. Strong earnings reports and the Federal Reserve’s statement that accommodative measures will remain in place for some time helped drive stocks higher. Still, concern remains that the global spread of the COVID-19 Delta variant could slow economic recovery.

Each of the benchmark indexes listed here advanced last Thursday following a favorable gross domestic product report and declining unemployment claims. The Global Dow led the way, climbing 0.9%, followed by the Russell 2000 (0.7%), the Dow and the S&P 500 (0.4%), and the Nasdaq (0.1%). The dollar fell, while crude oil prices and the yield on 10-year Treasuries advanced. Communication services (-0.9%) and real estate (-0.2%) were the only market sectors to decline. Financials and materials led the advancing sectors, each increasing 1.1%.

Stocks fell to close the week last Friday, with each of the benchmark indexes losing ground. The Global Dow dipped 0.9%, followed by the Nasdaq (-0.7%), the Russell 2000 (-0.6%), the S&P 500 (-0.5%), and the Dow (-0.4%). The yield on 10-year Treasuries decreased, while the dollar and crude oil prices advanced. Among the sectors, consumer discretionary dropped 2.8% and energy slid 1.8%.

The national average retail price for regular gasoline was $3.136 per gallon on July 26, $0.017 per gallon less than the prior week’s price but $0.961 more than a year ago. Gasoline production increased during the week ended July 23, averaging 9.8 million barrels per day, up from the prior week’s average of 9.1 million barrels per day. U.S. crude oil refinery inputs averaged 15.9 million barrels per day during the week ended July 23; this was 132,000 barrels per day less than the previous week’s average. For the week ended July 23, refineries operated at 91.1% of their operable capacity, down from the prior week’s level of 91.4%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 7/30Weekly ChangeYTD Change
DJIA30,606.4835,061.5534,935.47-0.36%14.14%
Nasdaq12,888.2814,836.9914,672.68-1.11%13.85%
S&P 5003,756.074,411.794,395.26-0.37%17.02%
Russell 20001,974.862,209.652,226.250.75%12.73%
Global Dow3,487.523,966.193,981.320.38%14.16%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.28%1.23%-5 bps32 bps
US Dollar-DXY89.8492.8892.14-0.80%2.56%
Crude Oil-CL=F$48.52$72.08$73.812.40%52.12%
Gold-GC=F$1,893.10$1,802.10$1,816.700.81%-4.04%

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 Open Market Committee met last week and noted progress on vaccinations, while indicators of economic activity and employment have continued to strengthen. Inflation has been rising, largely reflecting transitory factors. Despite these positive developments, the Committee noted that financial conditions remain accommodative. In lieu thereof, the Committee decided to maintain the target range for the federal funds rate at 0.00%-0.25%. In addition, the Committee will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals.
  • The initial, or advance, estimate of second-quarter gross domestic product showed the pace of economic growth was little changed at 6.5%, up marginally from the 6.3% annualized growth rate of the first quarter. Consumer spending, up 11.8%, was the largest contributor to the second-quarter growth. Consumer spending on services (led by food services and accommodations) rose 12.0% as the economy continued to reopen. Current-dollar GDP increased 13.0% at an annual rate, or $684.4 billion, in the second quarter to a level of $22.72 trillion. In the first quarter, current-dollar GDP increased 10.9%, or $560.6 billion. Consumer prices, as measured by the personal consumption price index, increased 6.4% in the second quarter, compared to a first-quarter increase of 3.8%. Excluding food and energy prices, the PCE price index increased 6.1%, compared to an increase of 2.7% in the first quarter. Personal income decreased 22.0% in the second quarter, reflective of a decrease in government social benefits related to pandemic relief programs.
  • Inflationary pressures may indeed prove to be transitory, but prices for consumer goods and services continue to rise. According to the latest Personal Income and Outlays report from the Bureau of Economic Analysis, consumer prices increased 0.5% in June following a similar increase the prior month. Energy prices rose 24.2%, while food prices increased 0.9%. Consumer prices have increased 4.0% since June 2020. Prices, excluding volatile food and energy, rose 0.4% in June and are up 3.5% over the past 12 months. Personal income inched up 0.1% in June after declining 2.2% in May, due in part to a decrease in pandemic-related government benefits. The June increase in personal income is reflective of an increase in employee compensation. Consumer spending rose 1.0% in June.
  • Sales of new, single-family homes dipped 6.6% in June, according to the latest figures from the Census Bureau. The median sales price of new houses sold in June 2021 was $361,800 ($380,700 in May). The average sales price was $428,700 ($434,000 in May). Inventory of new, single-family homes for sale increased to 6.3 months, up from 5.5 months in May. New home sales are 19.4% below the June 2020 estimate.
  • New orders for durable goods increased 0.8% in June, the thirteenth monthly increase out of the last 14 months. Transportation equipment, up for two consecutive months, led the increase, gaining 2.1% in June. Excluding transportation, new orders increased 0.3%. Excluding defense, new orders increased 1.0%. Shipments (+1.0%), unfilled orders (+0.9%), and inventories (+0.9%) advanced in June. New orders for nondefense capital goods, which are used in the production of other goods, increased 3.1% in June. New orders for defense capital goods decreased 1.5% in June.
  • Both imports and exports of goods increased in June, further deepening the international trade in goods deficit. The June trade deficit rose $3.0 billion from May, or 3.5%. Exports climbed $0.5 billion, or 0.3%. Imports increased $3.5 billion, or 1.5%. The trade in goods deficit has risen 28.2% since June 2020. Exports are up 40.6% and imports have advanced 35.5%.
  • For the week ended July 24, there were 400,000 new claims for unemployment insurance, a decrease of 24,000 from the previous week’s level, which was revised up by 5,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 17 was 2.4%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 17 was 3,269,000, an increase of 7,000 from the prior week’s level, which was revised up by 26,000. For comparison, during the same period last year, there were 1,262,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 11.6%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates for the week ended July 10 were Puerto Rico (5.2%), California (4.4%), Nevada (4.3%), New Jersey (3.8%), Rhode Island (3.8%), Illinois (3.7%), New York (3.5%), Pennsylvania (3.5%), Connecticut (3.4%), and the District of Columbia (3.2%). The states and territories with the largest increases in initial claims for the week ended July 17 were Michigan (+13,547), Texas (+10,730), Kentucky (+8,945), Missouri (+6,056), and Illinois (+3,915), while states and territories with the largest decreases were New York (-10,727), Puerto Rico (-3,904), Tennessee (-3,510), Oklahoma (-3,393), and Georgia (-1,870).

Eye on the Week Ahead

Purchasing managers surveys on the manufacturing and services sectors for July are out this week. But most attention will be paid to the July employment figures, out this Friday. There were 850,000 new jobs added in June. Overall, there were 1.7 million new jobs added over the second quarter of 2021.

Monthly Market Review – July 2021

The Markets (as of market close July 30, 2021)

Stocks closed generally higher in July, despite a downturn at the end of the month. Second-quarter corporate earnings data was generally strong, although some megacap companies posted weaker-than-expected earnings results. Economic news was mostly favorable. The economy expanded at an annualized rate of 6.5%, 850,000 new jobs were added, while the number of new unemployment claims declined. Industrial production rose, as did new orders for durable goods.

The housing market showed signs of slowing from its torrid pace earlier in the year. Inflation continued to run hot as consumer prices jumped 0.9%. The Federal Reserve indicated that, while the economy continues to show signs of growth, the interest rate target range and bond-buying measures will remain in place for some time.

The major indexes enjoyed a strong month, led by the S&P 500. Only the Russell 2000 and the Global Dow failed to post monthly gains. Each of the benchmarks are well ahead of their 2020 year-end values, led by the S&P 500, followed by the Global Dow, the Dow, the Nasdaq, and the Russell 2000.

The market sectors ended the month generally higher, with health care (4.7%), real estate (4.6%), utilities (4.2%), and information technology (3.8%) advancing, while energy (-8.4%) and financial services (-0.6%) fell. Treasury yields, crude oil prices, and the dollar slid from the June closing values. Gold prices advanced.

Stock Market Indexes

Market/Index2020 ClosePrior MonthAs of July 30Monthly ChangeYTD Change
DJIA30,606.4834,502.5134,935.471.25%14.14%
Nasdaq12,888.2814,503.9514,672.681.16%13.85%
S&P 5003,756.074,297.504,395.262.27%17.02%
Russell 20001,974.862,310.552,226.25-3.65%12.73%
Global Dow3,487.524,001.683,981.32-0.51%14.16%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.44%1.23%-21 bps32 bps
US Dollar-DXY89.8492.3492.14-0.22%2.56%
Crude Oil-CL=F$48.52$73.51$73.81-0.41%52.12%
Gold-GC=F$1,893.10$1,770.50$1,816.702.61%-4.04%

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: Job growth in June exceeded expectations following the addition of 850,000 new jobs. The May figure was revised up from 559,000 to 583,000. Overall, 1.7 million new jobs were added over the second quarter of 2021. Notable job growth in June occurred in leisure and hospitality (+343,000), with over half the job gain coming from food services and drinking places (+194,000). Job gains also occurred in public and private education (+269,000), professional and business services (+72,000), and retail trade (+67,000). In June, the unemployment rate inched up 0.1 percentage point to 5.9%, with the number of unemployed persons rising by 168,000 to 9.5 million. These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the pandemic (3.5% and 5.7 million, respectively, in February 2020). Among the unemployed, the number of persons on temporary layoff was essentially unchanged at 1.8 million. This measure is down considerably from the recent high of 18.0 million in April 2020 but is 1.1 million higher than in February 2020. The number of job leavers, that is, unemployed persons who quit or voluntarily left their previous job and began looking for new employment, increased by 164,000 to 942,000 in June. In June, the number of persons not in the labor force who currently want a job was 6.4 million, little changed over the month but up by 1.4 million since February 2020. In June, the number of employed persons who teleworked because of the pandemic fell to 14.4%, down from 16.6% in the prior month. In June, 6.2 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. This measure is down from 7.9 million in May. in June, the labor force participation rate and the employment-population ratio were unchanged at 61.6% and 58.0%, respectively. Average hourly earnings increased by $0.10 to $30.40 in June after increasing $0.15 in May. Average hourly earnings are up 3.6% from June 2020. The average work week dipped from 34.9 hours in May to 34.7 hours in June.
  • The number of claims for unemployment insurance continue to fall gradually. According to the latest weekly totals, as of July 17 there were 3,269,000 workers receiving unemployment insurance benefits, down from the June 19 total of 3,484,000. The unemployment rate for the week ended July 17 was 2.4%, unchanged from a month earlier. During the week ended July 10, Extended Benefits were available in 12 states; 47 states and territories reported 5,246,162 continued weekly claims for Pandemic Unemployment Assistance benefits (5,950,167 in June), and 46 states and territories reported 4,233,883 continued claims for Pandemic Emergency Unemployment Compensation benefits (5,273,180 in June).
  • FOMC/interest rates: Following its meeting in July, the Federal Open Market Committee decided to keep the target range for the federal funds rate at 0.00%-0.25% and expects to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment, and inflation has risen to 2% and is on track to moderately exceed 2% for some time. The FOMC also decided to continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month.
  • GDP/budget: According to the advance estimate, the economy accelerated at an annual rate of 6.5% in the second quarter of 2021 after advancing 6.3% in the first quarter of 2021. Consumer spending, as measured by personal consumption expenditures, increased 11.8% in the second quarter after rising 11.4% in the prior quarter. In the second quarter, nonresidential (business) fixed investment climbed 8.0% following a 12.9% increase in the first quarter; residential fixed investment fell 9.8% after increasing 13.3% in the first quarter. Exports rose 6.0% in the second quarter after decreasing 2.9% in the first quarter, and imports (which are a negative in the calculation of GDP) increased 7.8% in the second quarter (9.3% in the first quarter). The personal consumption expenditures price index (cost of consumer goods and services) increased 6.4% in the second quarter, compared with a 3.8% rise in the first quarter.
  • The Treasury budget deficit was $174.2 billion in June, following the May deficit of $132.0 billion. The deficit is nearly 80.0% smaller than the pandemic-inflated deficit of June 2020. Following the latest increase, the budget deficit through the first nine months of the current fiscal year widened to $2.24 trillion, 18.0% lower than last year’s deficit over the same period. Compared to last fiscal year, government expenditures have declined 6.0%, while receipts have increased 35.0%.
  • Inflation/consumer spending: Inflationary pressures continued to advance in June. According to the latest Personal Income and Outlays report, consumer prices edged up 0.5% in June, the same increase as May. Prices have increased 4.0% since June 2020. Excluding food and energy, consumer prices rose 0.4% in June (0.5% in May) and 3.5% since June 2020. Personal income increased 0.1% in June after falling 2.2% in May. Compensation of employees rose 0.7% in June, with wages and salaries increasing 0.8%. Disposable personal income was essentially unchanged in June from May. Consumer spending rose 1.0% in June following a 0.1% dip in May.
  • The Consumer Price Index climbed 0.9% in June — the largest one-month increase since June 2008. Over the 12 months ended in June, the CPI rose 5.4% — the largest 12-month increase since a 5.4% increase for the period ended in August 2008. A 10.5% rise in prices for cars and trucks accounted for more than one-third of the overall June price increase. Food prices increased 0.8% and energy prices rose 1.5%, with gasoline prices climbing 2.5%. Core prices, excluding food and energy, climbed 0.9% in June and have advanced 4.5% over the last 12 months — the largest 12-month increase since the period ended in November 1991. Over the last 12 months, energy prices have risen 24.5% and food prices have increased 2.4%.
  • Prices that producers receive for goods and services continued to climb in June, increasing 1.0% after advancing 0.8% in May. Producer prices increased 7.3% for the 12 months ended in June, the largest yearly gain since November 2010 when 12-month data was first calculated. In June, prices for services rose 0.8% and prices for goods moved up 1.2%. Producer prices less foods, energy, and trade services advanced 0.5% in June and have risen 5.5% since June 2020, the largest 12-month increase since August 2014.
  • Housing: Over the past several months, residential sales have slowed. In June, sales of existing homes increased for the first time in the last five months, climbing 1.4% after decreasing 0.9% in May. Over the past 12 months, existing home sales increased 22.9%. The median existing-home price was $363,300 in June ($350,300 in May), up 23.4% from May 2020. Unsold inventory of existing homes represented a 3.3-month supply in June, higher than the 2.5-month supply in May. Sales of existing single-family homes rose 1.4% in June following a 1.0% drop in May. Year over year, sales of existing single-family homes rose 19.3%. The median existing single-family home price was $370,600 in June, up from $356,600 in May.
  • New single-family home sales declined in June for the third consecutive month. New home sales fell 6.6% in June after falling 5.9% in May. Sales of new single-family homes have decreased 19.4% from June 2020. The median sales price of new single-family houses sold in June was $361,800 ($374,400 in May). The June average sales price was $428,700 ($430,600 in May). The inventory of new single-family homes for sale in June represents a supply of 6.3 months at the current sales pace, up from the May estimate of 5.5 months.
  • Manufacturing: Industrial production increased 0.4% in June after advancing 0.7% the previous month. Manufacturing output edged down 0.1% in June following a 0.9% increase in May. In June, mining increased 1.4% (1.2% in May) and utilities rose 2.7% (0.2% in May). Total industrial production in June was 9.8% higher than its year-earlier level, but it was 1.2% below its pre-pandemic (February 2020) level.
  • New orders for durable goods increased 0.8% in June after climbing 3.2% in May. Transportation equipment, up for two consecutive months, led the increase, climbing 2.1% in June. Excluding transportation, new orders increased 0.3% in June. Excluding defense, new orders rose 1.0%. New orders for capital goods advanced 2.6% in June following a 6.9% increase in May. New orders for nondefense capital goods increased 3.1% in June, while new orders for defense capital goods fell 1.5%.
  • Imports and exports: Both import and export prices rose in June for the seventh consecutive month. Import prices climbed 1.0% following a 1.4% advance in May. Import prices rose 11.2% over the 12 months ended in June. Import fuel prices increased 4.7% in June following a 4.0% jump in May. Import fuel prices advanced 85.1% for the year ended in June. Nonfuel import prices climbed 0.7% in June following a 0.9% advance in May. Export prices increased 1.2% in June after climbing 2.2% in May. For the year ended in June, the price index for exports rose 16.8%. Agricultural export prices increased 1.5% in June following a 6.1% advance in May. Nonagricultural exports rose 1.1% in June after increasing 1.7% in May.
  • The international trade in goods deficit was $91.2 billion in June, up $3.0 billion, or 3.5%, from May. Exports increased $0.5 billion, or 0.3%, while imports rose $3.5 billion, or 1.5%. For the 12 months ended in June, exports have risen 40.6%, while imports have increased 35.5%.
  • The latest information on international trade in goods and services, out July 2, is for May and shows that the goods and services trade deficit increased by 3.1% to $71.2 billion. May exports rose 0.6%, while imports increased 1.3%. Year over year, the goods and services deficit increased $110.9 billion, or 45.8%, from May 2020. Exports increased $101.6 billion, or 11.4%. Imports increased $212.5 billion, or 18.7%.
  • International markets: While inflation continues to heat up in the United States, other parts of the world are not seeing that trend. Japanese consumer prices continue to hover near zero, and the Bank of Japan does not expect its 2.0% target to be met in the next few years. On the other hand, other parts of the world are seeing mounting inflationary pressures. The Producer Price Index in Germany rose in June, pushing the annual inflation rate to 8.5%. The German Consumer Price Index is up 3.8% since June 2020. Overall, global markets were mixed in June. Solid earnings data and continuing quantitive easing helped lift investor confidence in some areas, which was tempered by the spread of covid virus strains. For June, the STOXX Europe 600 Index gained about 0.9%; the United Kingdom’s FTSE dipped 0.3%; Japan’s Nikkei 225 Index fell 5.2%; and China’s Shanghai Composite Index declined nearly 3.5%.
  • Consumer confidence: According to the latest report from the Conference Board, consumer confidence was relatively unchanged in July. The Consumer Confidence Index® stands at 129.1, up marginally from 128.9 in June. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, rose from 159.6 in June to 160.3 in July. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, was virtually unchanged at 108.4 in July compared to 108.5 in June. According to the report, consumer confidence was flat in July but remains at its highest level since the onset of the pandemic in February 2020.

Eye on the Month Ahead

While the summer began with an easing of pandemic-related restrictions, which helped spur economic growth, the rapid spread of the coronavirus, particularly the Delta strain, raises the possibility of reinstituting some of those same restrictions in August. Job growth and industrial production, which had been steadily improving, may be stunted as we move into the later part of the summer and into the fall.

What I’m Watching This Week – 26 July 2021

The Markets (as of market close July 23, 2021)

Last week proved to be a choppy one for stocks. The week began with stocks trending lower on news of a spike in the number of coronavirus cases. However, strong corporate earnings reports helped support the perception that the economy is continuing to advance, despite the cloud of the Delta variant hanging overhead. By last Friday, both the Nasdaq and the S&P 500 reached record highs, with megacap tech stocks helping drive the indexes upward. The Nasdaq gained 2.8% to lead the major benchmark indexes, followed by the Russell 2000, the S&P 500, the Dow, and the Global Dow. Yields on 10-year Treasuries dipped 2.0 basis points lower, while the dollar and crude oil prices each ended the week higher. Gold prices, which had been climbing, took a slight step back, falling about 0.5%.

Stocks slumped last Monday to begin last week as a spike in coronavirus cases, both domestically and abroad, put a damper on the economic recovery. Investors shied away from stocks and moved toward bonds, driving prices higher and yields lower. Each of the market sectors fell, led by financials, industrials, and materials. The S&P 500 dropped the most in two months, the Dow had its largest decline since October, while the small caps of the Russell 2000 continued to sink, falling nearly 10% since peaking in March. The CBOE Volatility Index, which had been relatively steady for several sessions, soared nearly 22.0%. Crude oil prices fell 7.4% to $66.51 per barrel — the first time prices fell below $70.00 per barrel since early June, after major oil-producing countries agreed to boost supply into 2022.

Wall Street closed higher last Tuesday, rebounding from a multi-session losing streak. Several strong corporate earnings reports helped renew investor optimism, at least temporarily, in a reviving economy. Each of the benchmark indexes posted solid gains, led by the Russell 2000 (3.0%), which enjoyed its first positive session since July 12. The Dow and the Nasdaq each gained 1.6%, followed by the S&P 500, which advanced 1.5%, and the Global Dow, which gained 1.0%. Industrials, financials, and real estate headed the sectors, with only consumer staples dipping modestly. The yield on 10-year Treasuries reversed course from last Monday, climbing to 1.20%. The dollar and crude oil prices also advanced by the close of trading.

Stocks advanced for the second straight day last Wednesday. Robust corporate earnings reports helped fuel renewed optimism in the economy, despite increasing coronavirus cases and inflation. The Russell 2000 again led the indexes, climbing 1.7%, followed by the Global Dow (1.5%) and the Nasdaq (0.9%). Both the Dow and the S&P 500 gained 0.8%. Energy shares advanced 3.5%, and financials increased 1.7%. Crude oil prices climbed back above $70.00 per barrel. The dollar dipped, while the yield on 10-year Treasuries jumped 7.1 basis points to 1.28%.

Equities closed last Thursday mostly higher, with only the Russell 2000 losing ground among the benchmark indexes. Technology led the market sectors, with health care, consumer discretionary, and communication services also advancing. Energy and financials both fell more than 1.0%. Treasury yields dipped lower, while the dollar and crude oil prices rose higher.

Another round of robust corporate profits helped push stocks to record highs last Friday. Surging earnings are reflecting an ongoing rise in economic activity, possibly allaying fears that stocks are overvalued. The Nasdaq and the S&P 500 each gained 1.0%, while the Dow (0.7%), the Russell 2000 (0.5%), and the Global Dow (0.4%) also finished the day ahead. Yields on 10-year Treasuries, the dollar, and crude oil prices advanced. Communication services led the sectors, increasing 2.7%.

The national average retail price for regular gasoline was $3.153 per gallon on July 19, $0.020 per gallon higher than the prior week’s price and $0.967 more than a year ago. Gasoline production decreased during the week of July 19, averaging 9.1 million barrels per day, down from the prior week’s average of 9.9 million barrels per day. U.S. crude oil refinery inputs averaged 16.0 million barrels per day during the week ended July 16; this was 87,000 barrels per day less than the previous week’s average. For the week ended July 19, refineries operated at 91.4% of their operable capacity, down from the prior week’s level of 91.8%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 7/23Weekly ChangeYTD Change
DJIA30,606.4834,687.8535,061.551.08%14.56%
Nasdaq12,888.2814,427.2414,836.992.84%15.12%
S&P 5003,756.074,327.164,411.791.96%17.46%
Russell 20001,974.862,163.242,209.652.15%11.89%
Global Dow3,487.523,941.753,966.190.62%13.73%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.30%1.28%-2 bps37 bps
US Dollar-DXY89.8492.7192.880.18%3.38%
Crude Oil-CL=F$48.52$71.46$72.080.87%48.56%
Gold-GC=F$1,893.10$1,811.70$1,802.10-0.53%-4.81%

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 housing sector continues to slow down from its accelerated pace. Building permits issued, housing starts, and housing completions each fell in June from their respective May totals. Building permits dipped 5.1% in June but are up 23.35% from June 2020. Housing starts slid 1.3% in June but have risen 43.3% over the past 12 months. Housing completions are 6.5% over their June 2020 totals, despite falling 1.4% last month. Building permits for single-family homes fell 6.3% and single-family home completions dropped 6.1% in June. However, single-family housing starts increased 6.3% last month.
  • Sales of existing homes increased 1.4% in June, snapping a streak of four consecutive monthly declines. Overall, existing home sales are up 22.9% over June 2020. Inventory was still relatively scarce in June, however. Unsold inventory sat at a 2.6-month supply at the current sales pace in June, modestly up from May’s 2.5-month supply but down from 3.9 months in June 2020. The median existing home price in June was $363,300, up from $350,300 in May and 23.4% over the June 2020 median sales price of $294,400. Sales of existing single-family homes also rose 1.4% in June and are up 19.3% since June 2020. The median existing single-family home price was $370,600 in June, 3.9% higher than the May median price of $356,600.
  • For the week ended July 17, there were 419,000 new claims for unemployment insurance, an increase of 51,000 from the previous week’s level, which was revised up by 8,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 10 was 2.4%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 10 was 3,236,000, a decrease of 29,000 from the prior week’s level, which was revised up by 24,000. This is the lowest level for insured unemployment since March 21, 2020, when it was 3,094,000. For comparison, during the same period last year, there were 1,398,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 11.2%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates for the week ended July 3 were Virgin Islands (4.8%), Puerto Rico (4.7%), Nevada (4.1%), Rhode Island (3.9%), California (3.8%), Illinois (3.7%), New Jersey (3.7%), New York (3.6%), Connecticut (3.5%), the District of Columbia (3.1%), and Pennsylvania (3.1%). The largest increases in initial claims for the week ended July 10 were in Texas (+10,091), New York (+8,190), Pennsylvania (+4,319), Tennessee (+3,061), and Missouri (+1,793), while the largest decreases were in Georgia (-5,286), Rhode Island (-4,807), Puerto Rico (-3,934), Kentucky (-3,771), and Maryland (-2,497).

Eye on the Week Ahead

There’s plenty of important market-moving economic information available this week, starting with the latest meeting of the Federal Open Market Committee. The FOMC has maintained the federal funds interest rate and bond purchasing program for several months. However, inflation has been trending higher in conjunction with an improving economy. At some point, the Committee with begin to scale back the quantitative easing measures currently in place, which will likely have a direct impact on the market. Also, the second estimate of gross domestic product for the second quarter is available this week. The initial estimate showed that the economy expanded at an annualized rate of 6.4% in the second quarter.

What I’m Watching This Week – 19 July 2021

The Markets (as of market close July 16, 2021)

Stocks suffered their worst week in quite some time, as each of the major indexes ended the week lower. Last week was the start of the second-quarter corporate earnings reporting period. Attention will be paid to reported earnings to gauge whether corporate profits can support equity valuations. Despite Fed Chair Jerome Powell’s repeated statements that the recent spike in inflation is temporary, last week’s rise in the Consumer Price Index and the Producer Price Index are likely to add fuel to the debate about the timing of the Federal Reserve’s stimulus reduction.

Equities edged higher to begin the week, with financials, communication services, and real estate leading the sectors, while consumer staples, industrials, and information technology lagged. Investors traded cautiously last Monday ahead of the release of second-quarter earnings and inflation data later in the week. The Global Dow led the benchmark indexes, climbing 0.5%, followed by the large caps of the Dow and the S&P 500, which each gained 0.4%. Treasury yields and the dollar advanced, while crude oil prices declined.

Stock values retreated and bond yields increased last Tuesday as investors seemed to weigh whether rising inflationary pressures will prompt the central bank to begin rolling back stimulus sooner rather than later. The small caps of the Russell 2000 fell the furthest, declining 1.9%. The Global Dow dropped 0.6%, the Nasdaq and the S&P 500 lost 0.4%, while the Dow fell 0.3%. The yield on 10-year Treasuries rose 3.9%, the dollar gained 0.6%, and crude oil prices increased 1.7% to $75.32 per barrel. Among the market sectors, only information technology advanced, gaining 0.4%. Real estate, materials, industrials, financials, and consumer discretionary fell by at least 1.0%.

Growth stocks outperformed value shares in a day of mixed results last Wednesday. Consumer staples, information technology, real estate, and utilities led the sectors. The Russell 2000 continued to lag, dropping 1.6% by the close of trading. Treasury yields fell as bond prices rose following reassuring comments from Fed Chair Jerome Powell, who suggested that stimulus measures are likely to remain for some time. The dollar was little changed, while crude oil prices declined.

The Dow, which inched ahead 0.2%, was the only benchmark index to post a gain last Thursday. Information technology shares lagged, pulling the Nasdaq down 0.7%. The Russell 2000 (-0.6%) declined for the third straight session, the Global Dow dipped 0.4%, and the S&P 500 inched down 0.3%. Treasury yields on 10-year bonds dropped to 1.3%. The dollar advanced, while crude oil prices decreased to $71.55 per barrel. Among the market sectors, only consumer discretionary, industrials, materials, real estate, and utilities advanced marginally.

Stocks tumbled lower last Friday as each of the benchmark indexes lost value. The Russell 2000 fell 1.2% on Friday. The Global Dow dipped 1.0%, while the large caps of the Dow (-0.9%) and the S&P 500 (-0.8%) also lost value. Tech shares fell 1.0%, dragging the Nasdaq down 0.8% for the day. The yield on 10-year Treasuries and the dollar inched higher, while crude oil prices fell marginally. Most of the market sectors dropped, with energy (-3.0%), materials (-1.6%), and financials (-1.5%) declining the most.

For the week, the Russell 2000 sank 5.1%, followed by the Nasdaq, the Global Dow, the S&P 500, and the Dow. Crude oil prices decreased for the second consecutive week, but are still 47.3% above their 2020 year-end price per barrel. The yield on 10-year Treasuries decreased 5 basis points, the dollar increased 0.67%, and gold prices increased marginally. The market sectors closed the week with mixed returns. Consumer staples (1.3%), utilities (2.6%), and real estate (0.7%) were the only sectors to advance. The remaining sectors decreased, led by energy (-7.7%) and materials (-2.4%).

The national average retail price for regular gasoline was $3.133 per gallon on July 12, $0.011 per gallon higher than the prior week’s price and $0.038 more than a year ago. Gasoline production decreased during the week of July 12, averaging 9.9 million barrels per day, down from the prior week’s average of 10.6 million barrels per day. U.S. crude oil refinery inputs averaged 16.1 million barrels per day during the week ended July 9; this was 22,000 barrels per day less than the previous week’s average. For the week ended July 12, refineries operated at 91.8% of their operable capacity, down from the prior week’s level of 92.2%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 7/16Weekly ChangeYTD Change
DJIA30,606.4834,870.1634,687.85-0.52%13.33%
Nasdaq12,888.2814,701.9214,427.24-1.87%11.94%
S&P 5003,756.074,369.554,327.16-0.97%15.20%
Russell 20001,974.862,280.002,163.24-5.12%9.54%
Global Dow3,487.523,998.023,941.75-1.41%13.02%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.35%1.30%-5 bps39 bps
US Dollar-DXY89.8492.1092.710.66%3.19%
Crude Oil-CL=F$48.52$74.69$71.46-4.32%47.28%
Gold-GC=F$1,893.10$1,808.60$1,811.700.17%-4.30%

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 have now risen 5.4% over the past 12 months after advancing 0.9% in June. According to the latest Consumer Price Index, the June increase was the largest one-month change since June 2008, when the index rose 1.0%. Prices for used cars and trucks continued to rise sharply, increasing 10.5% in June, which accounted for more than one-third of the overall June price increase. Last month, food prices increased 0.8% and energy prices rose 1.5%, with gasoline prices climbing 2.5%. Except for a dip in May, the CPI has increased month-over-month since January. Prices less food and energy rose 4.5% over the last 12 months, the largest 12-month increase since the period ended November 1991. Over the last 12 months, energy prices have risen 24.5% and food prices have increased 2.4%.
  • Producer prices climbed 1.0% in June following increases of 0.8% in May and 0.6% in April. For the 12 months ended in June, producer prices have increased 7.3% — the largest advance since 12-month data was first calculated in November 2010. In June, prices for services rose 0.8% and prices for goods moved up 1.2%. Producer prices less foods, energy, and trade services advanced 0.5% in June and have risen 5.5% since June 2020, which is the largest 12-month increase since August 2014. Margins for trade services, which measure changes in margins received by wholesalers and retailers, jumped 2.1%, representing 70% of the June increase in prices for services. Wholesalers, faced with rising commodity prices and increased labor costs due to a shortage of willing workers, are boosting prices charged to retailers. As the economy continues to recover, increasing demand for goods and services has put a strain on inventories. Producers, faced with increased wholesale costs and low supply, are passing on the higher cost to consumers.
  • In another sign of mounting inflationary pressures, both import and export prices advanced in June. Import prices rose 1.0% last month following a 1.4% jump in May. Export prices increased 1.2% in June after advancing 2.2% the previous month. Prices for imports rose 11.2% for the year ended in June. Fuel import prices advanced 4.7% in June. Nonfuel import prices rose 0.7%. Prices for exports increased 16.8% from June 2020 to June 2021. Agricultural exports advanced 1.5% last month and have not recorded a monthly decline since August 2020. Nonagricultural export prices increased 1.1% in June, driven higher by rising prices for industrial supplies and materials, capital goods, consumer goods, automotive vehicles, and nonagricultural foods.
  • Retail sales increased 0.6% in June following May’s revised -1.7% dip. Retail sales are 18.0% above their June 2020 pace. Retail trade sales were up 0.3% from May 2021, and 15.6% above last year. Clothing and clothing accessories stores were up 2.6% in June and 47.1% from June 2020, while food services and drinking places were up 2.3% last month and 40.2% over June 2020.
  • According to the latest report from the Federal Reserve, industrial production increased 0.4% in June after moving up 0.7% in May. In June, manufacturing output edged down 0.1%, as an ongoing shortage of semiconductors contributed to a decrease in the production of motor vehicles and parts. Excluding motor vehicles and parts, factory output increased 0.4%. The output of utilities advanced 2.7%, reflecting heightened demand for air conditioning, as much of the country experienced a heat wave in June. The index for mining increased 1.4%. Overall, total industrial production in June was 9.8% above its year-earlier level but 1.2% below its pre-pandemic (February 2020) level.
  • The government budget deficit was $174.2 billion in June, a 32.0% increase over the May deficit but 80.0% lower than the pandemic-impacted June 2020 deficit. Over the first nine months of the fiscal year, the deficit is $2.2 trillion, 18.0% lower than the deficit over the same period last fiscal year. So far in fiscal year 2021, receipts are up 35.0%, while government expenditures dipped 6.0%. Individual income tax receipts have risen 62.0% in fiscal year 2021, and corporate income taxes are up 188.0%.
  • For the week ended July 10, there were 360,000 new claims for unemployment insurance, a decrease of 26,000 from the previous week’s level, which was revised up by 13,000. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 3 was 2.4%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 3 was 3,241,000, a decrease of 126,000 from the prior week’s level, which was revised up by 28,000. This is the lowest level for insured unemployment since March 21, 2020, when it was 3,094,000. For comparison, during the same period last year, there were 1,479,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 11.9%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended June 26 were in Puerto Rico (4.8%), Nevada (4.3%), Georgia (4.2%), Rhode Island (4.2%), Connecticut (4.0%), California (3.6%), Illinois (3.5%), New Jersey (3.5%), Pennsylvania (3.4%), and New York (3.3%). The largest increases in initial claims for the week ended July 3 were in Puerto Rico (+6,722), Pennsylvania (+5,296), New York (+4,730), Texas (+4,645), and California (+2,588), while the largest decreases were in Oklahoma (-2,461), Massachusetts (-1,778), Washington (-1,596), Connecticut (-1,563), and Virginia (-1,371).

Eye on the Week Ahead

The latest data on housing starts and existing home sales is available this week. While the housing sector has been an area of strength throughout much of the past year, it has begun to slow over the past few months. The number of building permits and housing completions fell in May, while housing starts increased. Existing home sales also fell in May, the fourth consecutive monthly decline. Analysts suggest that activity in the housing sector is approaching pre-pandemic activity levels. A lack of available inventory and escalating prices are prominent factors in holding back sales.

What I’m Watching This Week – 12 July 2021

The Markets (as of market close July 9, 2021)

The holiday-shortened week can best be described as volatile. Some observers suggest investors may be retreating from stocks over uncertainties surrounding the pace of economic recovery coupled with easing inflation expectations. For much of the week, stock values road a roller-coaster ride of ups and downs, while Treasury prices climbed pulling, yields lower.

The market was closed last Monday in observance of Independence Day. Last Tuesday saw the yield on 10-year Treasuries fall to 1.37%, their lowest level since February. Energy, materials, financials, and industrials fell. The Russell 2000 fell 1.4%, the Dow dropped 0.6%, the Global Dow lost 1.1%, and the S&P 500 dipped 0.2%. Only the Nasdaq was able to eke out a 0.2% gain. Crude oil prices declined, while the dollar advanced.

Stocks were mixed last Wednesday as the Nasdaq and the S&P 500 each closed with fresh record highs; the Dow gained 0.3% but the Russell 2000 and the Global Dow lost value. Rising prices on 10-year Treasury notes pulled yields lower to close at 1.32%. The dollar inched higher. The minutes from the last Federal Reserve meeting showed that policymakers were still cautious about the economic outlook and were willing to remain patient about making changes to current stimulus policies. Among the market sectors, energy fell, with crude oil prices falling to $74.72 per barrel. Industrials and materials continued to show strength.

Equities retreated last Thursday as the Nasdaq, the Dow, and the S&P 500 gave back gains from the previous day. Each of the benchmark indexes listed here lost at least 0.7%, with the Global Dow (-1.1%) and the Russell 2000 (-1.0%) falling the most. Prices on 10-year Treasuries continued to rise, with a corresponding drop in yields. Crude oil prices rose, while the dollar fell. Not unexpectedly, each of the market sectors declined, led by financials (-2.0%), industrials (-1.4%), materials (-1.4%), and communication services (-1.1%).

Stocks closed last Friday on a high note. Each of the benchmark indexes listed here posted solid gains, led by the Russell 2000, which jumped 2.2%, followed by the Global Dow (1.4%) and the Dow (1.3%). The yield on 10-year Treasuries advanced for the first time in eight sessions. Crude oil prices increased 2.4%, while the dollar dipped lower. Financials, energy, and materials were sectors that climbed at least 2.0% last Friday.

Otherwise, stocks closed the week with mixed returns. The Nasdaq, the Dow, and the S&P 500 closed out the week ahead, while the Global Dow and the Russell 2000 lost value. Treasury yields, crude oil prices, and the dollar declined. Gold increased 1.1% for the week.

The national average retail price for regular gasoline was $3.122 per gallon on July 5, $0.031 per gallon higher than the prior week’s price and $0.945 more than a year ago. Gasoline production increased during the week of July 5, averaging 10.6 million barrels per day, up from the prior week’s average of 9.6 million barrels per day. U.S. crude oil refinery inputs averaged 16.1 million barrels per day during the week ended July 5; this was 184,000 barrels per day less than the previous week’s average. For the week ended July 5, refineries operated at 92.2% of their operable capacity, down from the prior week’s level of 92.9%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 7/9Weekly ChangeYTD Change
DJIA30,606.4834,786.3534,870.160.24%13.93%
Nasdaq12,888.2814,639.3314,701.920.43%14.07%
S&P 5003,756.074,352.344,369.550.40%16.33%
Russell 20001,974.862,305.762,280.00-1.12%15.45%
Global Dow3,487.524,032.893,998.02-0.86%14.64%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.43%1.35%-8 bps44 bps
US Dollar-DXY89.8492.2492.10-0.15%2.52%
Crude Oil-CL=F$48.52$75.20$74.69-0.68%53.94%
Gold-GC=F$1,893.101,789.00$1,808.601.10%-4.46%

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

  • In June, the services sector noted a marked upturn in business activity, according to the IHS Markit U.S. Services PMI™. The Business Activity Index registered 64.6 in June, down from 70.4 in May. However, the latest expansion in output was the third-fastest since data collection began in October 2009, only slower than recent upturns in May and April, respectively. Rates of output and new order growth eased from May’s record highs, however, while capacity constraints meant backlogs of work grew at the quickest rate for 10 months. Meanwhile, input prices increased at the second-fastest rate on record as supplier price hikes and greater wage bills pushed up cost burdens.
  • According to the latest Job Openings and Labor Turnover report, the number of job openings in May was little changed at 9.2 million. Job openings increased in other services (+109,000), state and local government education (+46,000), and educational services (+35,000). The number of job openings decreased in arts, entertainment, and recreation (-80,000); state and local government, excluding education (-56,000); and federal government (-17,000). The number of hires dipped slightly in May to 5.9 million from April’s 6.0 million. In May, total separations dropped by nearly 500,000 to 5.3 million. The number of layoffs and discharges fell marginally to 1.4 million in May. Over the 12 months ended in May, hires totaled 73.0 million and separations totaled 64.8 million, yielding a net employment gain of 8.2 million.
  • For the week ended July 3, there were 373,000 new claims for unemployment insurance, an increase of 2,000 from the previous week’s level, which was revised up by 7,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 26 was 2.4%, a decrease of 0.1 percentage point from the previous week’s revised rate. The advance number of those receiving unemployment insurance benefits during the week ended June 26 was 3,339,000, a decrease of 145,000 from the prior week’s level, which was revised up by 15,000. This is the lowest level for insured unemployment since March 21, 2020, when it was 3,094,000. For comparison, during the same period last year, there were 1,398,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 11.5%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended June 19 were in Rhode Island (4.6%), Puerto Rico (4.5%), Nevada (4.4%), California (4.0%), Connecticut (3.8%), Illinois (3.6%), Georgia (3.4%), New Jersey (3.4%), New York (3.4%), Alaska (3.2%), and the District of Columbia (3.2%). The largest increases in initial claims for the week ended June 26 were in Puerto Rico (+4,098), New Jersey (+3,381), Massachusetts (+2,845), New York (+1,857), and Connecticut (+1,516), while the largest decreases were in Pennsylvania (-17,664), Kentucky (-7,878), California (-7,643), Texas (-3,998), and Michigan (-2,880).

Eye on the Week Ahead

Inflationary indicators are front and center this week, with the latest reports on the Consumer Price Index and the Producer Price Index. The CPI increased 0.5% in May and is up 5.0% over the past 12 months. The PPI rose 0.8% in May and has climbed 6.6% since May 2020. If inflationary pressures are indeed transitory, as suggested by the Federal Reserve, then prices should begin to weaken somewhat over the next few months.

What I’m Watching This Week – 6 July 2021

The Markets (as of market close July 2, 2021)

Stocks opened last week mixed. Tech stocks surged, driving the Nasdaq to an all-time high. The S&P 500 inched ahead, while the Global Dow (-0.8%), the Russell 2000 (-0.5%), and the Dow (-0.4%) fell. Besides technology, other sectors performing well last Monday included communication services, utilities, and consumer discretionary. Energy, financials, and industrials dipped lower. Treasury yields and crude oil prices declined, while the dollar was mixed.

Equities pushed higher last Tuesday, despite talk of inflated equity values, maxed-out earnings growth, and the possible spread of another coronavirus strain. The Nasdaq, the Dow, and the S&P 500 eked out gains, while the Russell 2000 and the Global Dow fell. The yield on 10-year Treasuries inched higher, the dollar gained, and crude oil prices climbed past $73.40 per barrel. Among the market sectors, information technology, consumer discretionary, and health care advanced. Utilities declined more than 1.6%.

Stocks closed last Wednesday mixed, with the Dow, the S&P 500, and the Russell 2000 inching higher, while the Global Dow and the Nasdaq dipped slightly lower. Value, energy, and cyclical stocks led, while technology and growth shares fell. Treasury yields slid, while the dollar and crude oil prices advanced.

Equities kicked off the second half of the year on a positive note last Thursday. The S&P 500 gained 0.5% to reach a new closing high for the 35th time this year. The Russell 2000 reversed course from the past three sessions to post a solid 0.8% gain. The Dow (0.4%), the Global Dow (0.5%), and the Nasdaq (0.1%) also closed higher. Nearly all of the market sectors advanced, led by energy, utilities, and communication services. Only consumer staples dipped lower. Treasury yields, the dollar, and crude oil prices advanced.

A strong jobs report helped drive stocks higher last Friday. The S&P 500 advanced for the seventh straight session — the longest run since August 2020. The Nasdaq closed the day reaching another record high, the Dow and the Global Dow rose, while the Russell 2000 dipped lower. Treasury yields, the dollar, and crude oil prices fell. Information technology, consumer discretionary, communication services, and health care led the sectors.

Stocks ended last week generally higher, with the Nasdaq, the S&P 500, and the Dow each climbing more than 1.0%, while the Russell 2000 and the Global Dow lost value. Information technology added 3.2% to lead the sectors, followed by consumer discretionary, health care, and communication services. Crude oil prices rose again, ending the week at $75.20 per barrel. The dollar inched higher, while the yield on 10-year Treasuries fell.

The national average retail price for regular gasoline was $3.091 per gallon on June 28, $0.031 per gallon higher than the prior week’s price and $0.917 more than a year ago. Gasoline production decreased during the week of June 25, averaging 9.6 million barrels per day, down from the prior week’s average of 10.3 million barrels per day. U.S. crude oil refinery inputs averaged 16.3 million barrels per day during the week ended June 25; this was 187,000 barrels per day more than the previous week’s average. For the week ended June 25, refineries operated at 92.9% of their operable capacity, up from the prior week’s level of 92.2%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 7/2Weekly ChangeYTD Change
DJIA30,606.4834,433.8434,786.351.02%13.66%
Nasdaq12,888.2814,360.3914,639.331.94%13.59%
S&P 5003,756.074,280.704,352.341.67%15.87%
Russell 20001,974.862,334.402,305.76-1.23%16.76%
Global Dow3,487.524,046.274,032.89-0.33%15.64%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.53%1.43%-10 bps52 bps
US Dollar-DXY89.8491.8092.240.48%2.67%
Crude Oil-CL=F$48.52$73.97$75.201.66%54.99%
Gold-GC=F$1,893.10$1,780.101,789.00-0.50%-5.50%

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 increased by 850,000 jobs in June following May’s upwardly revised total of 583,000. Overall, 1.7 million new jobs were added over the second quarter of 2021. Nevertheless, employment is down by 6.8 million, or 4.4%, from its pre-pandemic level in February 2020. Notable job gains occurred in leisure and hospitality, public and private education, professional and business services, and retail trade. The unemployment rate ticked up 0.1 percentage point in June to 5.9%, and the number of unemployed persons increased by roughly 168,000 to 9.5 million. Both measures are considerably lower than their recent highs in April 2020, but remain well above their levels prior to the COVID-19 pandemic of 3.5% and 5.7 million, respectively. Among the unemployed, the number of job leavers — that is, unemployed persons who quit or voluntarily left their previous job and began looking for new employment — increased by 164,000 to 942,000 in June. The labor force participation rate was unchanged at 61.6% in June but is 1.7 percentage point lower than in February 2020. The employment-population ratio, at 58.0%, was also unchanged in June but is 3.1 percentage points below its February 2020 level. In June, 14.4% of employed persons teleworked because of the pandemic, down from 16.6% in the prior month. Last month, 6.2 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic — down from 7.9 million in May. Average hourly earnings rose by $0.10 to $30.40 in June and have increased 3.6% from June 2020. The average work week dipped from 34.9 hours in May to 34.7 hours in June.
  • The IHS Markit U.S. Manufacturing Purchasing Managers’ Index™ registered 62.1 in June, unchanged from May. New orders increased in June. The pace of increase was the second-fastest on record, with firms continuing to note marked upturns in demand from both new and existing clients. Survey respondents suggested that the primary hindrance to further output growth was ongoing supply-chain disruptions and some labor shortages. Selling prices continued to grow higher as input costs were passed on to clients.
  • The latest information on international trade of goods and services shows that the trade deficit increased by 3.1% in May to $71.2 billion. In May, exports increased by 0.6% and imports rose by 1.3%. Year to date, the goods and services deficit increased $110.9 billion, or 45.8%, from the same period in 2020.
  • For the week ended June 26, there were 364,000 new claims for unemployment insurance, a decrease of 51,000 from the previous week’s level, which was revised up by 4,000. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 19 was 2.5%, unchanged from the previous week’s revised rate. The advance number of those receiving unemployment insurance benefits during the week ended June 19 was 3,469,000, an increase of 56,000 from the prior week’s level, which was revised up by 23,000. For comparison, during the same period last year, there were 1,436,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 12.2%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended June 12 were in Rhode Island (5.1%), Nevada (4.4%), Puerto Rico (3.9%), Connecticut (3.8%), California (3.6%), Illinois (3.6%), Alaska (3.4%), New York (3.4%), Pennsylvania (3.3%), and the District of Columbia (3.2%). The largest increases in initial claims for the week ended June 19 were in Pennsylvania (+14,715), Michigan (+1,862), and Texas (+1,814), while the largest decreases were in Illinois (-4,762), California (-4,112), Ohio (-2,955), Florida (-2,229), and Georgia (-1,826).

Eye on the Week Ahead

The holiday-shortened week does not offer much for economic data, and market trading should be relatively slow. Investors may be interested in progress made on the bipartisan infrastructure legislation, while the minutes from the last Federal Open Market Committee meeting are available, which should shed a little more light on committee members’ opinions relative to inflation, interest rates, and stimulus.

Quarterly Market Review – 2Q 2021

The Markets (second quarter through June 30, 2021)

The second quarter began with stocks making solid gains in April. COVID vaccines became available to more Americans. The federal government and several states pushed forward with reopening after relaxing many of pandemic-related constraints. Economic data was favorable and encouraging. The first-quarter gross domestic product accelerated at an annualized rate of 6.4%, claims for unemployment slowed, 266,000 new jobs were added, and manufacturing expanded. Price inflation expanded, although the Federal Reserve asserted that it would continue stimulus measures, even if inflation reached and exceeded the Fed’s 2.0% target. Each of the benchmark indexes listed here posted solid monthly gains, led by the Nasdaq (5.4%), followed by the S&P 500 (5.2%), the Global Dow (2.9%), the Dow (2.7%), and the Russell 2000 (2.1%). Bond prices increased, pulling yields lower. Crude oil prices ended April at $63.50 per barrel after increasing by more than 7.0% from March. The dollar slipped 2.1%, while gold prices rose 3.5%, closing April at $1,788.20 per troy ounce.

Stocks ended May with mixed returns, with the Global Dow (3.59%) and the Dow (1.93%) posting solid gains, while the Nasdaq fell 1.53%. Sector returns varied, with financials, energy, and materials gaining more than 3.0%, while consumer discretionary and information technology dipped more than 2.5%. Long-term Treasury yields decreased marginally, the dollar dropped 1.3%, while crude oil prices continued to climb, gaining nearly 5.0%. Overall, economic data was positive and confirmed that economic growth was accelerating, but not at the pace some may have anticipated. Labor added 266,000 new jobs, well below the nearly 1,000,000 figure some economists predicted. The number of job openings reached its highest level since 2000, which appears to point to a shortage of available workers rather than a slowdown in labor demand. Inflation was the buzzword throughout the month as consumer prices continued to climb, stoking fears that the Federal Reserve would cut back on stimulus measures in place. The personal consumption expenditures price index rose 0.6%, the Consumer Price Index climbed 0.8%, and producer prices increased 0.6%. Nevertheless, Fed officials repeated assurances that the price hikes were temporary due to “transitory supply chain bottlenecks.”

Economic recovery continued in June. Stocks closed the month generally higher, with only the Dow and the Global Dow lagging. Tech shares rebounded from a moderate dip in May to push the Nasdaq to a series of record highs in June. Bond prices rose, dragging yields lower. Yields on 10-year Treasuries declined nearly 10 basis points last month. Crude oil prices climbed nearly $7.00 per barrel. Information technology led the sectors, advancing nearly 7.0%, while materials, financials, and consumer staples lost value. The dollar rose, while gold prices dropped. June saw 559,000 new jobs added, with notable job gains in leisure and hospitality, health care and social assistance, and manufacturing. Inflationary pressures may be peaking as supply-chain pressures that had driven commodity prices higher over the past several months may be easing. Lumber prices fell from record highs and retail vehicle prices may have crested as wholesale auto prices slid. Investor confidence may have been boosted in June with the announcement by President Joe Biden of a bipartisan infrastructure spending package.

Overall, the second quarter was a good one for equities. The Nasdaq gained 9.5%, followed closely by the S&P 500 (8.2%), the Global Dow (4.9%), the Dow (4.6%), and the Russell 2000 (4.1%). Real estate, information technology, energy, and communication services all posted quarterly gains of more than 10.0% to lead the market sectors. Year to date, the Russell 2000 is well ahead of its 2020 year-end closing value, followed by the Global Dow, the S&P 500, the Dow, and the Nasdaq.

The yield on 10-year Treasuries fell 30 basis points. Crude oil prices increased $14.17 per barrel, or 24.0%, in the second quarter. The dollar lost nearly 1.0%, while gold prices advanced 3.6%. The national average retail price for regular gasoline was $3.091 per gallon on June 28, up from the May 31 price of $3.027 and 8.4% higher than the March 29 selling price of $2.852.

Stock Market Indexes

Market/Index2020 CloseAs of June 30Monthly ChangeQuarterly ChangeYTD Change
DJIA30,606.4834,502.51-0.08%4.61%12.73%
Nasdaq12,888.2814,503.953.88%9.49%12.54%
S&P 5003,756.074,297.502.22%8.17%14.41%
Russell 20001,974.862,310.551.82%4.05%17.00%
Global Dow3,487.524,001.68-1.55%4.93%14.74%
Fed. Funds0.00%-0.25%0.00%-0.25%0 bps0 bps0 bps
10-year Treasuries0.91%1.44%-14 bps-30 bps-53 bps
US Dollar-DXY89.8492.342.55%-0.95%2.78%
Crude Oil-CL=F$48.52$73.5110.31%23.92%51.50%
Gold-GC=F$1,893.10$1,770.50-7.18%3.63%-6.48%

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 Month’s Economic News

  • Employment: Job growth, while positive, is not meeting expectations. There were 559,000 new jobs added in May, below the level predicted by some economists (approximately 650,000). The April figure was revised up from 266,000 to 278,000 — still not quite as robust as had been estimated. Notable job growth in May occurred in leisure and hospitality (+292,000), in public and private education (+87,000), and in health care and social assistance (+45,800). In May, the unemployment rate declined 0.3 percentage point to 5.8%. In May, the number of unemployed persons fell by 496,000 to 9.3 million. These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the pandemic (3.5% and 5.7 million, respectively, in February 2020). Among the unemployed, the number of persons on temporary layoff declined by 291,000 to 1.8 million. This measure is down considerably from the recent high of 18.0 million in April 2020 but is 1.1 million higher than in February 2020. In May, the number of persons not in the labor force who currently want a job was essentially unchanged at 6.6 million but is up by 1.6 million since February 2020. The number of employed persons who teleworked in May because of the pandemic fell to 16.6%, down from 18.3% in the prior month. In May, 7.9 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. This measure is down from 9.4 million in April. In May, the labor force participation rate inched down 0.1 percentage point to 61.6%, and the employment-population ratio rose 0.1 percentage point to 58.0%. Average hourly earnings increased by $0.15 to $30.33 in May after increasing $0.21 in April. Average hourly earnings are up 2.0% from May 2020. In May, the average work week was 34.9 hours for the third month in a row.
  • Claims for unemployment insurance have maintained a fairly steady pace over the past few months. According to the latest weekly totals, as of June 12 there were 3,390,000 workers receiving unemployment insurance benefits, down marginally from the May 15 total of 3,642,000. The unemployment rate for the week ended June 12 was 2.4%, down 0.2 percentage point from the May 15 rate of 2.6%. During the week ended June 5, Extended Benefits were available in 12 states (14 states during the week of May 8); 51 states and territories reported 5,950,167 continued weekly claims for Pandemic Unemployment Assistance benefits (6,515,657 in May), and 51 states and territories reported 5,273,180 continued claims for Pandemic Emergency Unemployment Compensation benefits (5,191,642 in May).
  • FOMC/interest rates: The Federal Open Market Committee met in June. The FOMC offered no significant policy changes following that meeting, maintaining the federal funds target rate range at 0.00%-0.25%, while continuing the current quantitative easing monetary policies. There was a change in the Committee’s quarterly projections, led by a projected increase in the federal funds rate in 2023. The FOMC continued to stress that current inflationary pressures are transitory and are likely to moderate.
  • GDP/budget: According to the third and final estimate, the economy accelerated at an annual rate of 6.4% in the first quarter of 2021 after advancing 4.3% in the fourth quarter of 2020. Consumer spending, as measured by personal consumption expenditures, increased 11.4% in the first quarter after rising 2.3% in the prior quarter. Nonresidential (business) fixed investment climbed 11.7% following a 13.1% increase in the fourth quarter; residential fixed investment continued to advance, increasing 13.1% in the first quarter after climbing 36.6% in the previous quarter. Exports decreased 2.9% in the first quarter of 2021 after advancing 22.3% in the fourth quarter of 2020, and imports (which are a negative in the calculation of GDP) increased 6.7% in the first quarter (29.8% in the fourth quarter of 2020). Federal nondefense government expenditures climbed 45.0% following a fourth-quarter decline of 8.9% primarily due to added federal stimulus payments and aid.
  • The Treasury budget deficit was $132.0 billion in May, following the April deficit of $225.6 billion. Government receipts were $463.7 billion in May ($439.2 billion in April), while outlays in May totaled $595.7 billion ($664.8 billion in April). The deficit is 67.0% lower than it was in May 2020. The deficit for the first eight months of fiscal year 2021, at $2.064 trillion, is 9.8% higher than the same period in the previous fiscal year. Government receipts rose from $2.019 trillion last fiscal year to $2.607 trillion this year, while government outlays increased from $3.899 trillion to $4.671 trillion.
  • Inflation/consumer spending: Inflationary pressures continued to advance in May. According to the latest Personal Income and Outlays report, consumer prices edged up 0.4% in May after advancing 0.6% in both March and April. Prices have increased 3.9% since May 2020. Excluding food and energy, consumer prices rose 0.5% in May (0.7% in April) and 3.4% since May 2020. Personal income decreased 0.2% in May after falling 13.1% in April. Disposable personal income dropped 2.3% in May following a 14.6% drop in April. The drop in personal income in May generally reflected a decrease in government assistance benefits, as both economic impact payments to households and pandemic unemployment compensation payments to individuals lessened. Consumer spending was essentially unchanged in May from the previous month.
  • The Consumer Price Index climbed 0.6% in May following a 0.8% increase in April. Over the 12 months ended in May, the CPI rose 5.0% — the largest 12-month increase since a 5.4% increase for the period ended in August 2008. Core prices, excluding food and energy, advanced 0.7% in May and are up 3.8% over the last 12 months. Prices for used cars and trucks continued to rise sharply, increasing 7.3% in May. This increase accounted for about one-third of the overall CPI increase. Food prices increased 0.4% in May, the same increase as in April. Energy prices were unchanged in May.
  • Prices that producers receive for goods and services continued to climb in May, increasing 0.8% after advancing 0.6% in April. Producer prices increased 6.6% for the 12 months ended in May, the largest yearly gain since November 2010 when 12-month data was first calculated. Producer prices less foods, energy, and trade services rose for the thirteenth consecutive month after advancing 0.7% in May. Food prices rose 2.6% and energy prices increased 2.2% in May.
  • Housing: Over the past several months, residential sales have slowed. In May, sales of existing homes fell for the fourth consecutive month, declining 0.9% after decreasing 2.7% in April. Nevertheless, over the past 12 months, existing home sales increased 44.6%. The median existing-home price was $350,300 in May ($341,600 in April), up 23.6% from May 2020. Unsold inventory of existing homes represented a 2.5-month supply in May, slightly higher than the 2.4-month supply in April. Sales of existing single-family homes decreased 1.0% in May following a 3.2% drop in April. Year over year, sales of existing single-family homes rose 24.4%. The median existing single-family home price was $356,600 in May, up from $347,400 in April.
  • New single-family home sales declined in May for the second consecutive month. New home sales fell 5.9% in May, the same decrease as in April. Sales of new single-family homes have increased 9.2% from May 2020. The median sales price of new single-family houses sold in May was $374,400 ($372,400 in April). The May average sales price was $430,600 ($435,400 in April). The inventory of new single-family homes for sale in May represents a supply of 5.1 months at the current sales pace, up from the April estimate of 4.4 months.
  • Manufacturing: Industrial production increased 0.8% in May after advancing 0.7% the previous month. Manufacturing output increased 0.9% in May following a 0.4% increase in April. In May, mining increased 1.2% (0.7% in April) and utilities rose 0.2% (2.6% in April). Total industrial production in May was 16.3% higher than its year-earlier level, but it was 1.4% below its pre-pandemic (February 2020) level.
  • New orders for durable goods increased 2.3% in May after falling 0.8% in April. Transportation equipment, up following two consecutive monthly decreases, led the increase, climbing 7.6% in May. Excluding transportation, new orders increased 0.3% in May. Excluding defense, new orders rose 1.7%. New orders for capital goods advanced 4.2% in May following a 0.8% increase in April. New orders for nondefense capital goods increased 2.7% in May, while new orders for defense capital goods rose 17.4%.
  • Imports and exports: Both import and export prices rose in May for the sixth consecutive month. Import prices climbed 1.1% following a 0.8% advance in April. Import prices rose 11.3% over the 12 months ended in May, the largest 12-month advance since a 12.7% increase for the 12 months ended in September 2011. Import fuel prices increased 4.0% in May following a 1.6% jump in April. Import fuel prices advanced 109.6% for the year ended in May. Nonfuel import prices climbed 0.9% in May following a 0.7% advance in April. Export prices increased 2.2% in May after climbing 1.1% in April. For the year ended in May, the price index for exports rose 17.4%, the largest 12-month increase since the index was first published in September 1983. Agricultural export prices increased 6.1% in May following a 0.6% advance in April. Nonagricultural exports rose 1.7% in May after increasing 1.2% in April.
  • The international trade in goods deficit was $88.1 billion in May, up $2.4 billion, or 2.8%, from April. Exports dipped 0.3%, while imports rose 0.8%. For the 12 months ended in May, exports have risen 58.6%, while imports have increased 39.2%.
  • The latest information on international trade in goods and services, out June 8, is for April and shows that the goods and services trade deficit was $68.9 billion, 8.2% lower than the March deficit. April exports were $205.0 billion, or 1.1%, greater than March exports. April imports were $273.9 billion, or 1.4%, lower than March imports. Year over year, the goods and services deficit increased $94.5 billion, or 50.5%, from April 2020. Exports increased $42.0 billion, or 5.6%. Imports increased $136.4 billion, or 14.6%.
  • International markets: While the Federal Reserve continues to preach patience when it comes to rising inflationary pressures, other countries may not be waiting to respond. The Bank of Mexico increased its interbank rate 25 basis points to 4.25%, citing the jump in the U.S. Consumer Price Index. On the other hand, the Bank of England held its monetary policy stance unchanged, with the bank rate at 0.1%. Elsewhere, the Eurozone continued to reopen its economy, but at a slower pace than in the United States primarily due to the slower start of COVID-19 vaccinations. Eurozone manufacturing expanded in June. The IHS Markit Eurozone Composite PMI® increased from 57.1 in May to 59.2 in June. The Japanese economy has taken longer to recover. The au Jibun Bank Flash Japan Composite PMI® dropped 1.1 percentage point in June to 47.8, which remains in contraction territory. In the markets for June, the STOXX Europe 600 Index gained about 2.3%; the United Kingdom’s FTSE rose 1.1%; Japan’s Nikkei 225 index fell 0.2%; and China’s Shanghai Composite Index declined nearly 1.2%.
  • Consumer confidence: According to the latest report from the Conference Board, consumer confidence improved in June. The Consumer Confidence Index® advanced 7.3 percentage points in June to 127.3. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased from 148.7.9 in May to 157.7 in June. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, rose to 107.0 in June from May’s 100.9. According to the report, following June’s increase, consumer confidence is at its highest level since the onset of the pandemic in March 2020. Despite consumers’ expectations that short-term inflation will increase, this had little impact on consumers’ confidence or purchasing intentions.

Eye on the Month Ahead

Economic data for the second quarter in general, and for June in particular, was generally positive. Heading into the third quarter of the year, the first estimate of the second-quarter gross domestic product is available in July. The economy accelerated at an annualized rate of 6.4% in the first quarter. Employment data for June is also out this month. May saw 559,000 new jobs added and the unemployment rate dip to 5.8%.

What I’m Watching This Week – 28 June 2021

The Markets (as of market close June 25, 2021)

Despite hawkish rhetoric from some high-ranking Federal Reserve officials, equities kicked off last week on an upswing, enjoying their biggest rally in several sessions. Energy, financials, and industrials helped push the S&P 500 up 1.4%. The Russell 2000 rebounded from a rough prior week, gaining 2.2%. The Dow gained 1.8%. The Global Dow climbed 1.0%, while the Nasdaq advanced 0.8%. Treasury yields and crude oil prices moved higher, while the dollar dipped.

The Nasdaq set a fresh record last Tuesday as stocks posted solid gains after Federal Reserve Chair Jerome Powell reiterated his views that inflationary pressures will prove to be transitory and that prices will eventually come down. Among the indexes, the Nasdaq climbed 0.8%, followed by the Global Dow (0.6%), the S&P 500 (0.5%), the Russell 2000 (0.4%), and the Dow (0.2%). The market sectors generally advanced, with the exception of real estate and utilities. Treasury yields, the dollar, and crude oil prices fell.

Last Wednesday stocks closed mixed, with the Russell 2000 (0.3%) and the Nasdaq (0.1%) posting modest gains, while the Dow (-0.2%), the S&P 500 (-0.1%), and the Global Dow (-0.1%) dipped lower. Unlike the previous day, 10-year Treasury yields, crude oil prices, and the dollar advanced. Consumer discretionary led the sectors, closing up 0.6%, while utilities, materials, and consumer staples declined.

Both the Nasdaq and the S&P 500 reached record highs last Thursday as strong economic reports and President Joe Biden’s bipartisan $579 billion infrastructure deal may have provided optimism to investors that the economy is pushing ahead. The Russell 2000 gained 1.2%, followed by the Dow (1.0%), the Global Dow (0.7%), the Nasdaq (0.7%), and the S&P 500 (0.6%). Financials, communication services, energy, and industrials led the market sectors. Treasury yields and the dollar dipped slightly, while crude oil prices increased marginally.

Stocks closed generally higher last Friday with only the Nasdaq falling minimally. Stocks tied to economic recovery (e.g., consumer staples and consumer discretionary) performed well. The Dow advanced 0.7%, the Global Dow climbed 0.6%, the S&P 500 gained 0.3%, and the Russell 2000 inched up 0.2%. Falling bond prices sent the yield on 10-year Treasuries up 3.3%. Crude oil prices gained nearly 1.0%, while the dollar was essentially unchanged. The market sectors mostly advanced, led by financials and utilities, while information technology fell 0.2%.

The week ended with each of the benchmark indexes posting gains. The small caps of the Russell 2000 led the way, followed by the Dow, the S&P 500, the Global Dow, and the Nasdaq. Year to date, the benchmark indexes listed here are well ahead of their 2020 closing values, with the Russell 2000 up more than 18.0% and the Global Dow ahead by 16.0%. Last week was also a positive one for the major market sectors. Energy (6.7%) and financials (5.3%) gained the most, while utilities advanced less than 1.0%. Crude oil prices continued to surge, increasing 3.6% for the week to nearly $74.00 per barrel. Crude oil prices have risen 52.5% since the start of the year.

The national average retail price for regular gasoline was $3.060 per gallon on June 21, $0.009 per gallon less than the prior week’s price but $0.931 higher than a year ago. Gasoline production increased during the week of June 21, averaging 10.3 million barrels per day, up from the prior week’s average of 9.9 million barrels per day. U.S. crude oil refinery inputs averaged 16.1 million barrels per day during the week ended June 18; this was 224,000 barrels per day less than the previous week’s average. For the week ended June 18, refineries operated at 92.2% of their operable capacity, down from the prior week’s level of 92.6%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 6/25Weekly ChangeYTD Change
DJIA30,606.4833,290.0834,433.843.44%12.51%
Nasdaq12,888.2814,030.3814,360.392.35%11.42%
S&P 5003,756.074,166.454,280.702.74%13.97%
Russell 20001,974.862,237.752,334.404.32%18.21%
Global Dow3,487.523,942.204,046.272.64%16.02%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.45%1.53%8 bps62 bps
US Dollar-DXY89.8492.3291.80-0.56%2.18%
Crude Oil-CL=F$48.52$71.41$73.973.58%52.45%
Gold-GC=F$1,893.10$1,765.00$1,780.100.86%-5.97%

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 third and final estimate of first-quarter gross domestic product showed the economy advanced at an annualized rate of 6.4%, unchanged from the second estimate. Personal consumption expenditures (consumer spending) rose 11.4%. The personal consumption expenditures price index (consumer prices) increased 3.7%. Contributing to the increase in GDP were durable goods (+26.6%), nondurable goods (+49.2%), residential fixed investment (+13.1%), nonresidential (business) fixed investment (+11.7%), and nondefense government spending (+45.0%). Exports fell 2.1%, while imports (a negative in the calculation of GDP) rose 9.5%.
  • The Personal Income and Outlays report for May includes the personal consumption expenditures price index, an inflationary indicator favored by the Federal Reserve. In May, the PCE price index advanced 0.4% and is up 3.9% from May 2020. Personal income decreased 2.0% in May. Disposable (after-tax) personal income dipped 2.3%, and personal consumption expenditures, a measure of consumer spending, were essentially unchanged from April. The decline in personal income and consumer spending is likely related, in part, to a decrease in government assistance benefits, as both economic impact payments to households and pandemic unemployment compensation decreased.
  • Existing-home sales decreased for a fourth straight month in May, according to the National Association of Realtors®. Total sales of existing homes dipped 0.9% last month but are still up 44.6% year over year. Lack of inventory continues to be a primary factor holding back sales, along with surging home prices, which may be squeezing some first-time buyers out of the market. The median existing home price in May was $350,300, up from April’s price of $341,600 and well above the May 2020 price of $283,500. Total housing inventory sits at a 2.5-month supply at the present sales pace, up slightly from April’s 2.4-month supply. Single-family home sales fell 1.0% in May but are up 39.2% from one year ago. The median existing single-family home price was $356,600 in May, higher than April’s price of $347,400.
  • Sales of new single-family homes also fell in May, down 5.9% from April but still 9.2% ahead of the May 2020 total. The median sales price of new houses sold in May 2021 was $374,400, 2.5% above the April median sales price. The average sales price was $430,600, 2.3% higher than the April average sales price. Inventory of new single-family homes for sale sat at a 5.1-month supply at the current sales rate, up from 4.6 months in April. The dip in sales of new single-family homes may be attributable to several factors, including an increase in new home construction, rising new home prices, and a predictable slow-down in the pace of sales when compared to last year’s surge.
  • The manufacturing sector continues to rebound from the pandemic-driven slowdown. New orders for durable goods increased 2.3% in May. This increase, up for 12 of the last 13 months, followed a 0.8% April decrease. Excluding transportation, new orders increased 0.3%. Excluding defense, new orders increased 1.7%. In May, transportation equipment, up 7.6% following two consecutive monthly decreases, led the increase. Shipments of durable goods in May, up for two of the last three months, increased 0.4%. Last month, increasing demand impacted unfilled orders, which increased 0.8%, and inventories, which rose 0.7%. In May, nondefense new orders for capital goods climbed 2.7%, while new orders for defense capital goods climbed 17.4%.
  • In May, the international trade in goods (excluding services) deficit widened by $2.4 billion, or 2.8%. Exports of goods dipped by 0.3%, while imports of goods increased 0.8%. For the 12 months ended in May, exports have risen 58.6%, while imports have climbed 39.2%.
  • For the week ended June 19, there were 411,000 new claims for unemployment insurance, a decrease of 7,000 from the previous week’s level, which was revised up by 6,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 12 was 2.4%, 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 June 12 was 3,390,000, a decrease of 144,000 from the prior week’s level, which was revised up by 16,000. This is the lowest level for insured unemployment since March 21, 2020, when it was 3,094,000. For comparison, during the same period last year, there were 1,460,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 12.4%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended June 5 were in the Virgin Islands (19.5%), Rhode Island (4.8%), Nevada (4.5%), California (3.9%), Connecticut (3.9%), Puerto Rico (3.9%), Alaska (3.7%), Illinois (3.6%), New York (3.6%), and the District of Columbia (3.2%).The largest increases in initial claims for the week ended June 12 were in Pennsylvania (+21,905), California (+15,131), Kentucky (+9,172), Florida (+3,344), and Texas (+3,127), while the largest decreases were in Michigan (-5,615), Delaware (-2,516), Washington (-1,998), Tennessee (-1,746), and Alabama (-1,706).

Eye on the Week Ahead

One of the most closely watched economic indicators is out this week: the employment situation. The labor market has been picking up steam for the past several months. May saw 559,000 new jobs added, while the unemployment rate and the number of unemployed persons dropped. Also of note is the inflationary trend in wages, which have risen 2.0% since May 2020.

What I’m Watching This Week – 14 June 2021

The Markets (as of market close June 11, 2021)

Stocks were mixed last Monday, with the Russell 2000 (1.4%) and the Nasdaq (0.5%) gaining, while the Dow fell 0.4% and the S&P 500 and the Global Dow closed the day essentially unchanged. Treasury yields, crude oil prices, and the dollar fell. Communication services, health care, and real estate advanced, while materials, industrials, and financials dipped lower.

Gains by cyclicals, energy, real estate, and meme stocks helped propel the Russell 2000 (1.1%) and the Nasdaq (0.3%) higher last Tuesday. The Dow, the Global Dow, and the S&P 500 were little changed for the second consecutive session. Treasury yields fell, while the dollar advanced. Crude oil prices climbed 1.4%, driving prices to over $70.00 per barrel — the highest price this year.

Last Wednesday saw stocks post gains early in the day, only to dip by the close of trading. Bond prices rose, pulling yields lower. The 10-year Treasury yield closed below 1.50% for the first time since the beginning of March. The dollar declined, while crude oil prices were little changed. Each of the benchmark indexes listed here lost value, with the Russell 2000 dropping nearly 0.75%, while the large caps of the Dow and the S&P 500 declined 0.4%. Among the market sectors, health care and utilities outperformed, while financials and industrials each fell nearly 1.0%.

Stocks closed last Thursday higher, with the S&P 500 reaching a record closing high. Investors apparently looked beyond another increase in consumer prices (the Consumer Price Index rose 0.6% in May), instead betting that the Federal Reserve will maintain its accommodative policies. Tech shares and megacaps advanced, helping to push the Nasdaq up 0.8%. The S&P 500 rose 0.5%, while the Global Dow and the Dow ticked up 0.1%. The small caps of the Russell 2000 fell 0.7%. Most of the market sectors advanced, led by health care, real estate, information technology, and communication services. Financials, industrials, materials, and energy lost ground. The yield on 10-year Treasuries continued to slip, falling to 1.46%, while crude oil prices rose. The dollar was mixed.

Last Friday saw stocks continue to tick higher following Thursday’s advance. The Russell 2000 reversed course from Thursday to post a solid 1.1% gain on Friday. The Nasdaq gained 0.4%, the S&P 500 edged up 0.2%, and both the Dow and the Global Dow inched up 0.1%. Treasury yields, crude oil prices and the dollar advanced. Financials, information technology, consumer discretionary, and materials led the sectors, while health care and real estate fell.

Stocks closed generally higher last week, with the Russell 2000 and the Nasdaq leading the benchmark indexes, followed by the S&P 500. Both the Dow and the Global Dow lost value. Among the market sectors, health care, real estate, consumer discretionary, utilities, and information technology notched weekly gains, while financials, industrials, and materials lost ground. The dollar rose moderately, Treasury yields dipped, and crude oil prices climbed again and have risen more than 45.0% year to date.

Prices at the pump continue to increase. The national average retail price for regular gasoline was $3.035 per gallon on June 7, $0.008 per gallon more than the prior week’s price and $0.999 higher than a year ago. U.S. crude oil refinery inputs averaged 15.9 million barrels per day during the week ended June 4, which was 327,000 barrels per day more than the previous week’s average. For the week ended June 4, refineries operated at 91.3% of their operable capacity, up from the prior week’s level of 88.7%. Gasoline production decreased last week, averaging 9.4 million barrels per day, down from the prior week’s average of 9.6 million barrels per day.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 6/11Weekly ChangeYTD Change
DJIA30,606.4834,756.3934,479.60-0.80%12.65%
Nasdaq12,888.2813,814.4914,069.421.85%9.16%
S&P 5003,756.074,229.894,247.440.41%13.08%
Russell 20001,974.862,286.412,335.812.16%18.28%
Global Dow3,487.524,111.494,091.55-0.48%17.32%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.56%1.46%-10 bps55 bps
US Dollar-DXY89.8490.1390.520.43%0.76%
Crude Oil-CL=F$48.52$69.31$70.782.12%45.88%
Gold-GC=F$1,893.10$1,894.30$1,877.80-0.87%-0.81%

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 0.6% in May after climbing 0.8% in April. Over the last 12 months, the Consumer Price Index increased 5.0% — the largest 12-month increase since a 5.4% increase for the 12 months ended in August 2008. Prices for used cars and trucks continued to rise sharply, increasing 7.3% in May, which accounted for about one-third of last month’s overall CPI increase. Food prices rose 0.4% in May, while energy prices were essentially unchanged. Core prices less food and energy rose 0.7% in May and 3.8% over the last 12 months, which is the largest 12-month increase since the comparable period ended in June 1992. Over the last 12 months, energy prices have risen 28.5%, of which gasoline prices have risen 56.2%. Used car and truck prices have increased 29.7% since May 2020, while food prices are up 2.2% over the same period. This data will likely stoke the debate over whether inflationary pressures are temporary or long-lasting. On the one hand, the Federal Reserve has maintained that the rise in prices is due to transitory factors resulting from a broader reopening of the economy. Conversely, recent data showing labor shortages during a time of business reopenings may bolster concerns that rising inflation could have some staying power, which could lead to earlier-than-expected fiscal tightening by the Fed.
  • The international trade in goods and services deficit was $68.9 billion in April, down $6.1 billion, or 8.2%, from the March deficit. April exports were $205.0 billion, $2.3 billion, or 1.1%, more than March exports. April imports were $273.9 billion, $3.8 billion, or 1.4%, less than March imports. Year to date, the goods and services deficit increased $94.5 billion, or 50.5%, from the same period in 2020. Exports increased $42.0 billion, or 5.6%. Imports increased $136.4 billion, or 14.6%.
  • In April, there were 9.3 million job openings and the rate of job openings climbed to 6.0% — all-time highs since the Job Openings and Labor Turnover report began in December 2000. Job openings increased in accommodation and food services and in manufacturing. In April, the number of hires was little changed from the prior month, while the number of total separations increased by 324,000. Over the 12 months ended in April, hires totaled 75.4 million and separations totaled 64.0 million, yielding a net employment gain of 11.3 million.
  • The federal budget deficit decreased for the third consecutive month in May. At $132.0 billion, the deficit was $93.6 billion less than the April deficit and 67% smaller than the May 2020 deficit. In May, government receipts increased 5.6% to $463.7 billion, while government expenditures decreased 11.6% to $595.7 billion. Through the first eight months of the fiscal year, the government deficit sits at $2.064 trillion, 9.8% higher than the deficit over the same period of the last fiscal year.
  • The number of new claims for unemployment insurance benefits fell for the sixth consecutive time last week. For the week ended June 5, there were 376,000 new claims for unemployment insurance, a decrease of 9,000 from the previous week’s level. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.5% for the week ended May 29, a decrease of 0.2 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 29 was 3,499,000, a decrease of 258,000 from the prior week’s level, which was revised down by 14,000. This is the lowest level for insured unemployment since March 21, 2020, when it was 3,094,000. For comparison, during the same period last year, there were 1,537,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 13.2%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended May 22 were in Nevada (4.8%), Rhode Island (4.5%), Connecticut (4.2%), Puerto Rico (4.1%), California (4.0%), Alaska (3.9%), Pennsylvania (3.9%), New York (3.7%), Illinois (3.6%), and the District of Columbia (3.3%). The largest increases in initial claims for the week ended May 29 were in Pennsylvania (+7,064), Illinois (+4,298), Kentucky (+3,454), Missouri (+2,744), and Michigan (+1,664), while the largest decreases were in Texas (-3,114), Oregon (-1,822), Virginia (-1,753), Florida (-1,625), and Washington (-1,577).

Eye on the Week Ahead

Several market-moving economic reports are out this week. Inflation is the focus with the Producer Price Index and prices for imports and exports. The Federal Reserve’s industrial production report for May is also available. Manufacturing has been picking up steam with the easing of pandemic-related restrictions. Investors seem to be waiting to see if the Group of Seven (G-7) agree to impose levies on big firms to help participating countries collect more taxes. Also, investors will be watching for signs from the Federal Open Market Committee, which meets this week, that fiscal stimulus will remain in place, despite rising inflationary pressures.

What I’m Watching This Week – 7 June 2021

The Markets (as of market close June 4, 2021)

Stocks were mixed last Tuesday to begin the holiday-shortened week. The Russell 2000 climbed 1.1%, the Global Dow added 0.6%, and the Dow eked out a 0.1% gain. The Nasdaq and the S&P 500 each dipped 0.1%. Yields on 10-year Treasuries, the dollar, and crude oil prices advanced. Energy gained nearly 4.0% as the OPEC+ alliance agreed to increase output in July. Real estate and materials also advanced more than 1.0%, while health care fell 1.6%. European markets closed higher for the fourth consecutive month as economies continue to show signs of recovery from the pandemic.

Stocks closed last Wednesday slightly higher as investors awaited the release of important employment data due later in the week. The energy sector continued to climb as crude oil prices jumped 1.5%, reaching $68.75 per barrel. Real estate, consumer staples, technology, utilities, and financials were the other market sectors to post gains. Materials dipped 0.9%. The Global Dow led the benchmark indexes, up 0.4%. The S&P 500, the Nasdaq, the Dow, and the Russell 2000 were little changed. Treasury yields fell, while the dollar was mixed.

The downward trend in unemployment claims wasn’t enough to spur the market last Thursday. Each of the benchmark indexes listed here lost value, with the Nasdaq (-1.0%) and the Russell 2000 (-0.8%) leading the decline. Treasury yields, the dollar, and crude oil prices advanced. The market sectors were mixed, with utilities, consumer staples, health care, energy, and financials gaining, while consumer discretionary, technology, and communication services dropped.

Stocks climbed higher last Friday on the heels of decreasing unemployment claims and increasing hires. Tech and communication services led the sectors. Each of the benchmark indexes listed here gained value by the close of trading last Friday, led by the Nasdaq (1.5%), and followed by the S&P 500 (0.9%), the Dow and the Global Dow (0.5%), and the Russell 2000 (0.3%). The yields on 10-year Treasuries dipped 4.0% and the dollar lost nearly 0.5%. Crude oil prices continued to rise, climbing 0.7% on the day.

Last week ended with each of the benchmark indexes listed here scoring gains, led by the Global Dow, followed by the Russell 2000, the Dow, the S&P 500, and the Nasdaq. Favorable jobs data may have offset concerns of rising inflation for investors. Also of importance were reports that President Biden would accept a 15% floor on corporate taxes rather than raising the tax rate from 21% to 28%. The President also offered a $1 trillion infrastructure plan, down from $1.7 trillion originally proposed. Among the market sectors, energy again led the way, up 6.7% for the week, while consumer discretionary shares and health care fell. Crude oil prices have increased nearly 43.0% year to date.

The national average retail price for regular gasoline was $3.027 per gallon on May 31, $0.007 per gallon more than the prior week’s price and $1.053 higher than a year ago. U.S. crude oil refinery inputs averaged 15.6 million barrels per day during the week ended May 28, which was 358,000 barrels per day more than the previous week’s average. Refineries operated at 88.7% of their operable capacity last week. Gasoline production decreased last week, averaging 9.6 million barrels per day, down from the prior week’s average of 9.7 million barrels per day.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 6/4Weekly ChangeYTD Change
DJIA30,606.4834,529.4534,756.390.66%13.56%
Nasdaq12,888.2813,748.7413,814.490.48%7.19%
S&P 5003,756.074,204.114,229.890.61%12.61%
Russell 20001,974.862,269.152,286.410.76%15.78%
Global Dow3,487.524,064.854,111.491.15%17.89%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.58%1.56%-2 bps65 bps
US Dollar-DXY89.8490.0490.130.10%0.32%
Crude Oil-CL=F$48.52$66.64$69.314.01%42.85%
Gold-GC=F$1,893.10$1,907.40$1,894.30-0.69%0.06%

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 employment data for May was very encouraging. There were 559,000 new jobs added in May, the unemployment rate declined 0.3 percentage point to 5.8%, and the number of unemployed persons fell by 496,000 to 9.3 million. These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the COVID-19 pandemic (3.5% and 5.7 million, respectively, in February 2020). Notable job gains occurred in leisure and hospitality, in public and private education, and in health care and social assistance. The number of those who permanently lost their jobs decreased by 295,000 to 3.2 million in May but is 1.9 million higher than in February 2020. The labor force participation rate dipped 0.1 percentage point to 61.6%, and the employment-population ratio rose by 0.1 percentage point to 58.0%. In May, 16.6% of employed persons teleworked because of the pandemic, down from 18.3% in the prior month. In May, 7.9 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, down from 9.4 million in the previous month. Average hourly earnings increased by $0.15 to $30.33 in May, following an increase of $0.21 in April. Average hourly earnings are up 2.0% since May 2020. In May, the average workweek was 34.9 hours for the third month in a row.
  • Purchasing managers were bullish on the state of manufacturing in May. The IHS Markit U.S. Manufacturing Purchasing Managers’ Index™ posted 62.1 in May, up from 60.5 in April — a new record high. Stronger client demand and a commensurate increase in new orders pushed output higher in May. Also, strong demand and supply constraints drove supplier prices higher, leading to the sharpest rise in cost burdens since July 2008. The rise in cost was passed on to customers, with the rate of charge inflation quickening to a record high.
  • According to the latest report from IHS Markit, the services sector experienced its fastest rise since October 2009. The record expansion in output was driven by an increase in new business, particularly in new export orders. Employment in the services sector also expanded, although firms reported having difficulties filling vacancies. Input costs increased, prompting service providers to pass on their higher costs to clients, with the pace of inflation quickening at the steepest rate since the survey began.
  • For the week ended May 29, there were 385,000 new claims for unemployment insurance, a decrease of 20,000 from the previous week’s level, which was revised down by 1,000. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. According to the Department of Labor, the advance rate for insured unemployment claims was 2.7% for the week ended May 22, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 22 was 3,771,000, an increase of 169,000 from the prior week’s level, which was revised down by 40,000. For comparison, during the same period last year, there were 1,605,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 13.3%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates in the week ended May 15 were in Nevada (5.5%), Rhode Island (4.6%), Puerto Rico (4.5%), Connecticut (4.3%), Alaska (4.2%), New York (3.8%), Pennsylvania (3.8%), Illinois (3.6%), California (3.5%), and the District of Columbia (3.5%). The largest increases in initial claims for the week ended May 22 were in Delaware (+2,187), Illinois (+1,688), Pennsylvania (+1,347), California (+773), and Rhode Island (+644), while the largest decreases were in Washington (-8,020), New Jersey (-5,290), Florida (-4,679), Ohio (-3,844), and Michigan (-2,605).

Eye on the Week Ahead

An important inflation indicator, the Consumer Price Index for May, is available this week. Consumer prices rose 0.8% in April and are up 4.2% since April 2020. Information provided in this report is very important for investors and will likely be a market mover following its release.