Stocks fell for the second straight week, with each of the benchmark indexes losing ground. The Dow led the declines, followed by the Global Dow, the Russell 2000, the S&P 500, and the Nasdaq. Although the employment report for June (see below) showed a moderate decline in the number of new jobs added, wages continued to track higher, which could support further interest rate hikes by the Federal Reserve. The Fed meets next on July 26, and the latest employment data makes another pause in rate increases highly unlikely. Whether the rate hike is 25.0 basis points or 50.0 basis points is open to conjecture. Crude oil prices advanced for the second straight week as export cuts by Saudi Arabia and Russia began to impact prices. Ten-year Treasury yields increased by 24.0 basis points, impacted by the weakest number of new job hires in three years and rising wages.
Equities got off to a slow start last Thursday. The Fed got more ammunition to continue to hike interest rates, following a better-than-expected ADP employment report. The Russell 2000 and the Global Dow fell 1.6%, the Dow dropped 1.1%, while the Nasdaq and the S&P 500 slid 0.8%. Ten-year Treasury yields gained 9.6 basis points, closing at 4.04%. Crude oil prices were flat, while the dollar and gold prices slid lower.
Last Friday saw stocks close mostly lower, with only the Russell 2000 (1.22%) and the Global Dow (0.40%) ending the session higher. The Dow lost 0.6%, the S&P 500 fell 0.3%, and the Nasdaq dipped 0.1%.
Stock Market Indexes
Last Week’s Economic News
Employment slowed somewhat in June. There were 209,000 new jobs added last month, down from the 2023 average of 278,000 per month, and well off the monthly average of 399,000 since May 2022. In May, employment continued to trend up in government, health care, social assistance, and construction. Both the unemployment rate, at 3.6%, and the number of unemployed persons, at 6.0 million, changed little in June. The unemployment rate has ranged from 3.4% to 3.7% since March 2022.
Manufacturing contracted for the second straight month in June, according to the latest survey from S&P Global. The S&P Global US Manufacturing Purchasing Managers’ Index™ posted 46.3 in June, down from 48.4 in May. Unlike the manufacturing sector, services expanded in June. According to the latest purchasing managers’ index from S&P Global, new orders increased for the fourth straight month. The June PMI™, at 54.4, rose at the second-fastest pace in over a year. Survey respondents were more upbeat in their expectations for the remainder of the year and sought to expand employment accordingly.
Eye on the Week Ahead
Quite a bit of attention will be focused on the Consumer Price Index and the Producer Price Index, which are released this week. The CPI inched up 0.1% in May and 4.0% for the year. The PPI declined 0.3% in May and was up only 1.1% for the 12 months ended in May.
Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI, Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Forecasts are based on current conditions, subject to change, and may not come to pass. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities and other bonds fluctuates with market conditions. Bonds are subject to inflation, interest-rate, and credit risks. As interest rates rise, bond prices typically fall. A bond sold or redeemed prior to maturity may be subject to loss. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.
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