The Markets (as of market close July 2, 2020)
Domestic stocks surged last Monday, as a robust pending home sales report overshadowed an increase in COVID-19 cases. Pending sales of existing homes soared over 44% in May, a record-setting rate that should lead to gains in existing homes sales in June and July. A jump in Boeing Co. stock helped propel the S&P 500, which virtually wiped out its June losses. The small caps of the Russell 2000 climbed more than 3.0%, followed by the Dow, the S&P 500, the Nasdaq, and the Global Dow. Crude oil prices gained nearly 3.0% while bond yields were unchanged.
Last Week’s Economic News
- There were 4.8 million new jobs added in June, and the unemployment rate declined by 2.2 percentage points to 11.1%. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed in March and April due to the COVID-19 pandemic and efforts to contain it. In June, employment in leisure and hospitality rose sharply. Notable job gains also occurred in retail trade, education and health services, other services, manufacturing, and professional and business services. The number of unemployed persons fell by 3.2 million to 17.8 million. Although unemployment fell in May and June, the jobless rate and the number of unemployed are up by 7.6 percentage points and 12.0 million, respectively, since February. The labor force participation rate increased by 0.7 percentage point in June to 61.5% but is 1.9 percentage points below its February level. The employment-population ratio, at 54.6%, rose by 1.8 percentage points over the month but is 6.5 percentage points lower than in February. In June, average hourly earnings fell by $0.35 to $29.37, reflecting job gains among lower-paid workers. The average work week decreased by 0.2 hour to 34.5 hours in June.
- According to the latest purchasing managers’ index from IHS Markit, manufacturing continued to retract in June, but at a much slower pace than in April and May, as companies began to reopen. New orders from customers helped push production higher last month. The manufacturing sector saw employment decline for the fourth consecutive month in June, however, the overall loss of jobs was considerably weaker than those seen in the prior two months.
- The news was more positive from the Institute for Supply Management® as it reported that manufacturing grew in June. According to the Manufacturing ISM® Report on Business®, the June purchasing managers’ index registered 52.6%, up 9.5 percentage points from the May reading. This figure indicates expansion in the overall economy for the second straight month after April’s contraction. New orders increased dramatically, climbing nearly 25 percentage points from May. Production and employment also expanded notably in June.
- The international trade in goods and services report for May, out July 2, shows the trade deficit was $54.6 billion, up $4.8 billion, or 9.7%, from April. In May, exports fell 4.4% and imports slid 0.9%. Year to date, the goods and services deficit decreased $22.3 billion, or 9.1%, from the same period in 2019. Of note, the trade deficit with China increased $1.9 billion to $27.9 billion in May. Exports to China increased $0.7 billion to $10.0 billion, and imports from China increased $2.7 billion to $37.9 billion.
- For the week ended June 27, there were 1,427,000 claims for unemployment insurance, a decrease of 55,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims was 13.2% for the week ended June 20, unchanged from the prior week’s revised rate. The advance number of those receiving unemployment insurance benefits during the week ended June 20 was 19,290,000, an increase of 59,000 from the prior week’s level, which was revised down by 291,000.
Eye on the Week Ahead
Have a nice week!