The markets are trying to join in on the July 4^th festivities the day after, having fizzled out the day before.  Volume is light, and this may cause air pockets, where the market makes quick moves in a short time frame and then snaps back to where it was.   News of discussions between the U.S. and the EU about the possible removal of tariffs on imported vehicles lit a fire under the markets this morning, coupled with Micron’s (MU) press release indicating only approximately 1% of revenues would be affected by the court decision out of China. 

There has been a fair amount of economic data and financial news for the market to digest.  Overall, the reports were in line with expectations.

MBA Mortgage Applications

For the week ended June 29, mortgage applications were lower by 0.5%, which was better than the prior week’s 4.9% slump.  Refinance applications declined 2% and purchase applications were lower by 0.5%.  The average 30-year mortgage rate declined 5 basis points to 4.79%. Historically, mortgage rates are still low, over the past 50 years rates averaged 8% and were as high as 18% in the 1980’s.

ISM Non-Manufacturing

The ISM non-manufacturing index (NMI) reading of 59.1% was 0.5% above May and the 101^st consecutive month of non-manufacturing sector growth.   This corresponds to a 3.7% increase in real GDP on an annualized basis according to Anthony Nieves, Chairman of the Institute for Supply Management.

• Business Activity Index increased to 63.9 from 61.3 in May
• New Orders Index rose to 63.2 from 60.50
• Employment Index decreased from 54.1 to 53.6
• Price Index decreased to 60.7 from 64.3
• Employment Index decreased from 54.1 to 53.6
• Imports decreased to 51.5 from 54

Readings above 50 indicate expansion.  Although the Price Index decreased from the prior month, prices are still rising, just at a slower pace.  This is the 28^th consecutive month that prices increased. 

Of the 20 non-manufacturing industries reporting, only three reported a decrease in growth; Agriculture, Forestry, Fishing & Hunting.  Most correspondents echoed the same thoughts. Sales remain strong due to a strong labor market, while supply constrains are feeding into rising input prices.

Here is a comment from a retail trade correspondent, “Sales have remained strong and are continuing to increase. Currently, we are on pace for a top-line record. The bottom line is more flat, as we have been fighting commodity cost increases and exchange-rate variances throughout the first half of 2018.” 

Initial and Continuing Claims

Seasonally adjusted initial unemployment claims for the week ending June 30, edged up 3,000 to 231,000 exceeding the estimate of 225,000 and up from the prior week’s revised level of 228,000 (revised +1,000).  A better gauge of comparison is the 4-week moving average, which was 224,500 up 2,250 from the previous week.  This is the 174th continuous week that initial claims have been below the 300,000 level.    

Continuous claims for the week ended June 23 increased 32,000, while a better reading, the 4-week moving average, decreased 1,750 from the prior week’s revised average (+500).  This is the lowest continuing claims have been since December 8, 1973. 

The labor market continuous to show strength. We will be watching tomorrow’s average hourly earnings report for any hints of wage inflation.

Crude Inventories

For the week ended June 29, crude oil inventories increased by 1.2 million barrels from the prior week.  Estimates were looking for a draw of approximately 5 million barrels.  This caused WTI crude to drop from $74.05 to $73.13 and is currently at $73.50.  Crude oil inventories are 2% below the five-year average for this time of year.

 

 

 

EIA Petroleum Inventories	Actual	Expected
Crude Oil	1.2 million	-5.2 million
Gasoline	-1.5 million	-0.8 million
Distillates	0.1 million	-0.5 million

Comments

Manufacturing, retail #’s looking good! Truckers, corrugated boxes....keep America moving! Oil Is Key, we are exporting, shale we own, watch for that gusher, an old fashion gusher! Come on in, get your feet wet, oil, shale, energy will be setting the pace for our economy, our future, we are for the first time in the driver’s seat, and country after country will be calling us for oil, more than OPEC, Russia, Venezuela, Iran are dead, we are the super power of oil and the only super power in the world! THE WAY IT SHOULD BE FOR WORLD PEACE🇺🇸💪 Neil Feuer on 7/5/2018 5:10:07 PM

Try to get Tammy Bruce to run in 6 years for President. She is spot on. Charles, T Ayers on 8/15/2018 7:00:11 AM

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