Chief Economist Scott Brown discusses the latest market data.
It’s all about the pandemic. Rising cases in a number of states fueled fears of a second wave of infections and a more protracted economic recovery. In its updated World Economic Outlook, the International Monetary Fund lowered its forecast of global growth in 2020 to -4.7% (vs. a -3.0% estimate made three months ago).
Nonfarm payrolls rose by 4.8 million in the initial estimate for June, following a 2.7 million gain in May, still down 14.6 million (-11.0%) from February. Strong rebounds were recorded in areas hit hardest by the pandemic (leisure & hospitality, retail, construction, and manufacturing) – although still far below pre-pandemic levels. The unemployment rate fell to 11.1%, with a smaller under-reporting from misclassifications than in recent months. While the number on temporary layoffs fell, those on permanent layoffs picked up.
Other economic data reports remained consistent with a sharp-but-partial rebound from a steep drop in economic activity in March and April. The ISM Manufacturing Index rose to 52.6 in June, from 43.1 in May, with moderate gains in new orders and production, suggesting that manufacturing activity has turned the corner (although far from recovered). The Conference Board’s Consumer Confidence Index rose to 98.1, from May’s 85.9), but the survey was mostly before the recent rise in COVID-19 cases. Initial claims for unemployment benefits edged down to 1.427 million in the week ending June 27, still elevated. U.S. exports fell sharply in May (-32.1% y/y).
Minutes of the June 9-10 FOMC meeting showed that Federal Reserve officials were concerned about the economy and were prepared to do more to support the recovery.
Next week, the economic calendar thins out. The ISM Non-Manufacturing Index is expected to be less weak in June. The Producer Price Index should reflect higher wholesale gasoline prices, with core inflation remaining mild. Jobless claims, still elevated in recent weeks, will bear watching.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.2475||1.259|
|Dollars per Euro||1.1251||1.129|
|Japanese Yen per Dollar||107.47||107.88|
|Canadian Dollars per Dollar||1.359||1.311|
|Mexican Peso per Dollar||22.699||19.051|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.32||1.31|
Treasury Yield Curve – 07/02/2020
As of close of business 07/01/2020
S&P Sector Performance (YTD) – 07/02/2020
|July 6||—||ISM Non-Manufacturing Index (June)|
|July 9||—||Jobless Claims (week ending July 4)|
|July 10||—||Producer Price Index (June)|
|July 14||—||Consumer Price Index (June)|
|July 15||—||Industrial Production (June)|
|—||Fed Beige Book|
|July 16||—||Retail Sales (June)|
|July 17||—||Building Permits, Housing Starts (June)|
|July 29||—||FOMC Policy Decision|
|July 30||—||Real GDP (2Q20, adv. est., benchmark revisions)|
|July 30||—||Employment Report (July)|
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
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