Market Drops on More Tepid Economic Data

Economic Report Monitor #54 July 23rd, 2020
As the pandemic continues to add new cases to the overall count, the market continues to struggle with an economic condition that is not improving. In another day of selling off, major indexes fell -1 to -2% with the Nasdaq leading the drop at -2.29%. Safe havens like gold and silver flourish as optimism stales and valuations continue to be tough to justify. The jobless claims reports today is just one example of that as initial claims increase for the first time since it seemed to have peaked in April. At 1.416 million, an additional 109,000 claims were added last week as the number of individuals beginning the unemployment process remains above 1 million for another week. Continuing claims did drop though as the insured unemployment rate fell to 11.1% and 1.107 million individuals stop receiving unemployment insurance. States where COVID-19 cases are resurging, Florida, Georgia, and California, are the main culprits for the increase in claim…

Jobless Claims Struggle to Fall Despite Bullish Spending Seen in Retail Sales

Economic Report Monitor #53 July 16th, 2020
The previous choppy bullish trading session was reversed into a choppy bearish trading on Thursday as indexes headed for a loss. The Nasdaq, down -0.73%, underperformed the Dow Jones Industrial Average and the S&P 500 again, down -0.50% and -0.34%. Over the last 5 days, information technology stocks have dropped -2.75%, the most in a list of 11 sectors, with energy leading at 5.57%. This differs greatly from the YTD performance where information technology is up 17.51%, well above the -37.78% movement in energy. It seems money might be avoiding the sectors which have benefited the most in the rebound as a resurgence could crash them harder. Economic reports confirmed the shaky status in a mixed bag of data points.
Most notably, initial jobless claims came in above 1 million once again at 1.3 million, just 10,000 lower than the week before. Overall insured unemployment also fell but again only at a slow pace. Totaled continued claims were 17…

More Economic Reports Point to a Bottom, but a Recovery Continues to Look Father Off

Economic Report Monitor #52 July 15th, 2020
A choppy day in trading ends with indexes higher about 0.5% to 1.0%. Nasdaq once again lagged the other major indexes as tech stocks look to slow from their fast pace. Treasury yields remain low despite hopes that Moderna's coronavirus vaccine would continue to show positive results. The dollar reaches towards YTD lows. Consolidation looks to be the trend as bad news continues to outweigh the good news, and the recovery pauses as investors look for a reason to buy. The latest Empire State Manufacturing Index for July 2020 suggested manufacturing activity has stabilized in NY.
The general business conditions index grew to 17.2 in July marking its first positive reading since February. While the index values have completed a V-shaped recovery, most categories point to just a stabilization. Despite the indexes jumping to near-term highs, only a net 17.4% and 15.2% reported seeing higher new orders and shipments. Unfilled orders were gridlocked…

Inflation Is Mostly Flat in June but Battered Indexes Show Signs of Life

Economic Report Monitor #51 July 14th, 2020
The market ripped higher today on continued hope that a vaccine would quell the coronavirus pandemic earlier than expected. The Dow Jones Industrial Average jumped 2.13% with the S&P 500 and Nasdaq up 1.34% and 0.94%. With tech stocks lagging, the market favored the most battered companies beating out stocks that have fared better. In another bid of optimism, the latest CPI report for June 2020 signaled a resurgence in demand after three months of contraction.

In June, the CPI's monthly gain was 0.6%, a strong improvement that grew YoY CPI to 0.6%. Food and energy CPI caused most of the gains with the former up 0.6% and the latter up 5.1%. That left the YoY ex-food-and-energy CPI flat at 1.2%. Most notably in the food category the meat index continued its rise, up 4.8% in June and 20.4% in the last 3 months. In fact, all six major grocery store food group indexes rose over the past 12 months as stockpiling pressure continued through COV…

Pending Home Sales Posts its Largest Ever Monthly Gain

Economic Report Monitor #50 June 27th, 2020
Another quiet day economic day opens the last week of June trading which has been bearish so far. Indexes ended their rebounds off March bottoms as uncertainty over a resurgence in cases rises to limit hopes that the health crisis would be over quicker than expected. That does not seem to be the case. However, the real estate market looks to have shaken off that disappointment. The National Association of Realtor's (NAR) pending home sales report released today increased 44.3% in May after two months of declines. This is the highest one month increase in the series history. Despite the steep incline, year-over-year contract activity was still down -5.1%.  The NAR's chief economist Lawrence Yun suggests that the robust rebound in the housing sector "could lead the way for a broader economic recovery." With the strong report, the forecasts for existing-home sales and new home sales for 2020 were increased.

The Dallas Fed Manufac…

Consumption Recovery Slow Despite Massive Increase in Disposable Income

Economic Report Monitor #49 June 26th, 2020

The week ends with a look at the report of personal income and outlays in May. On a month over month basis, personal income fell -4.2% after being boosted by stimulus checks in April. Disposable income fell with it, down -4.9%. The increase in cash from the stimulus and partial reopening of the economy allowed consumption to rise 8.2% in May. The largest bump was in durable goods consumption which grew 28.6% while services consumption was up just 5.4% and nondurable goods consumption was up 7.7%. However, inflation remains at lows from April with the general PCE price index at 0.5% and the more closely followed PCE price index (excluding food and energy) at 1.0%. YoY comparisons still put personal consumption down -9.8% despite disposable personal income up 8.2% in the same period. Here, services lag the most, down -14.3% from a year ago. It's clear that consumers' economic well-being is not the culprit for sluggish consumption, but in…

Initial Jobless Claims Still Over 1 million as Sluggish Employment Recovery Continues

Economic Report Monitor #48 June 25th, 2020

Jobless claims take the headlines again as elevated initial claims numbers continue to be reported. Last week 1.48 million initial claims for unemployment were filed, just a 60,000 drop from the week before. Continued claims also remained high, despite states reopening, with a 13.4% insured unemployment rate dropping just 0.5%. That means 19.522 million individuals are still claiming unemployment, just a 767,000 drop. Employment just hasn't recovered as most would hope with businesses still forced to keep costs low on restricted cash flow. There is also the concern that individuals receiving more in benefits than they would in wages might decide to delay their return to the workforce. These are just two factors playing into the sluggish recovery seen in jobless claims.
Durable goods new orders data was a bit more optimistic as the May report showed a 15.8% increase in new orders. Transportation equipment, an industry that was hurt badly, sa…