ICYMI: WEEKLY MARKET RECAP – WEEK OF JULY 6TH THROUGH JULY 10TH
We’re halfway through the year, and it feels as though we’ve lived 20 lifetimes. Markets attempt to make sense of the chaos due to the increase in the number of new cases in the U.S. The rest of the world tries to ease restrictions.
Let’s take a look around the world.
In the U.S., the rise in new Covid-19 cases in Southern and Western states continues to put pressure on the markets and the overall economy. The markets responded accordingly with unease. Earnings season is here, but don’t expect many bright spots as several sectors continue to be impacted by COVID.
In unemployment news, It looks like the additional $600/week unemployment benefit will go the way of the dodo bird. The odds of extending the benefit are looking slim.
The June Non-Manufacturing Purchasing Manager’s Index (PMI) data was released last week. The index is a gauge of how well the non-manufacturing sector is doing. The index indicated a reading of 57.1% up, 11.6% from June. Anything above 50% means that the non-manufacturing sector is expanding.
The job openings and labor turnover survey (JOLTS) issued by the Bureau of Labor Statistics was also released. The report highlights the number of job vacancies. A vacancy is a position that expects to be filled and started within the next 30 days. The most recent survey showed an increase of 2.4 million hires in May, the most significant monthly increase since the reporting began.
(*The pandemic impacted data collection. The survey, typically created from information gathered by phone at a data collection center, included electronic data submissions this time around due to lockdowns. The inability to reach respondents that generally participate in the survey by phone also impacted the collection efforts).
The Federal Reserve released the Consumer Credit report for May. The use of consumer credit can be a gauge for deterring if an economy is growing or contracting. In May, consumer credit (read borrowing) decreased by an annual rate of 5.3%. Revolving credit (ex. Credit cards & HELOCs) fell at an annual rate of 28.6%.
The Producer Price Index, which measures any change in the prices of goods sold by manufacturers, was lower than expected for June.
Prices fell .2% after a 0.4% gain in May. Energy and gasoline prices went up (7.7% & 26.3% respectively). Food prices, on the other hand, declined by 5.2%.
The Eurozone’s retail sales were higher than expected, up 17.8% in May. Textiles, clothing, and other non-food sales were much higher in May than April (34.5% compared to -16.7% in April).
Construction activity continues to decline in Germany, but France & Italy have seen an increase. Overall, the Eurozone construction PMI increased to 48.3. Note that a reading below 50 means that there’s still a significant decline in the Eurozone economy.
The European Commission announced changes to its economic forecasts for member countries. The commission expects a decline of 8.3% in 2020 due to the continued impact of the pandemic.
There was good news coming out of Brazil. Industrial production rose 7% in June, the most significant increase in output since June 2018. Retail sales were also up in June, with a rise of 13.9%.
In Chile, exports rose 2.3% from the previous year due to an increase in the sale of copper. You may recall that Chile is the world’s largest producer of copper, and if there’s an increase in demand, it bodes well for the world economy.
Malaysia’s central bank cut a key interest rate down to 1.75% to boost borrowing. The cut was the 4th rate cut for the central bank year-to-date. The bank continues to provide additional stimulus measures in hopes of aiding recovery from the pandemic.
The International Monetary Fund revised its projections for African due to the uncertainty of a recovery in many African nations. The group now expects the Sub-Saharan economy to shrink over 3% compared to the earlier estimate of 1.6%.
Some numbers for people who like numbers:
The Dow Jones Industrial Average closed at 26,075 up almost 1% for the week
S&P 500 closed the week up 1.8% ending at 3,185
Nasdaq was up 4% from the previous week ending at 10,617
MSCI EAFE closed at 1,813 up .34%.