The four-week rally for stocks came to an end last week. Traders turned cautious after Fed officials continued to support more interest-rate hikes. All major benchmark indexes lost ground, with the S&P 500 declining for the first time in five weeks. Yields on 10-year Treasuries climbed 14.0 basis points. The dollar had its best week since April 2020. Crude oil prices fell by nearly $2.00 per barrel. Gold plunged lower, falling nearly $60.00 per ounce. Traders saw the stock of a large retailer fall more than 40.0%, and cryptocurrency-linked stocks declined.
Last Week’s Economic News
- Sales of existing homes declined 5.9% in July, the sixth straight monthly decline. Year over year, existing home sales are down 20.2%. According to a report from the National Association of Realtors®, rising mortgage rates, which peaked at 6.0% at the end of June, impacted existing home sales. Since then, mortgage rates have declined to near 5.0%, which should bring more buyers back to the market. The median existing single-family home price was $410,600 in July, down from the June price of $420,900 but up from the July 2021 price of $371,400.
- Building permits issued for new housing fell 1.3% in July but are 1.1% ahead of the July 2021 rate. Permits for single family housing also declined in July, dropping 4.3%. Last month saw housing starts slip 9.6% (-10.1% for single family housing starts). Housing completions rose 1.1% in July, although completions of single family homes dipped -0.8%.
- Industrial production rose 0.6% in July after making no advance the prior month. Manufacturing output increased 0.7% last month following 0.4% declines in both May and June. Contributing to the production increase in July was a 6.6% rise in the production of motor vehicles and parts, while factory output elsewhere moved up 0.3%. The index for mining increased 0.7%, while the index for utilities decreased 0.8%. Overall, total industrial production in July was 3.9% above its year-earlier level.
- Retail sales were unchanged in July from their June total. However, sales at the retail level were 10.3% above the July 2021 pace. Retail trade sales were also unchanged in July from the previous month, but are up 10.1% from a year ago. In July, sales at motor vehicle and parts dealers fell 1.6%, gasoline station sales dipped 1.8%, and sales at general merchandise stores decreased 0.7%. Retail sales advanced at food services and drinking places (0.1%), nonstore (online) retailers (2.7%), miscellaneous store retailers (1.5%), and building material and garden equipment and supplies stores (1.5%).
- The national average retail price for regular gasoline was $3.938 per gallon on August 15, $0.764 higher than a year ago.
- For the week ended August 13, there were 250,000 new claims for unemployment insurance, a decrease of 2,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended August 6 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 6 was 1,437,000, an increase of 7,000 from the previous week’s level, which was revised up by 2,000.
Eye on the Week Ahead
The second estimate of gross domestic product for the second quarter is available this week. The initial reading showed the economy retracted 0.9% in the second quarter. The report on personal income and outlays for July is also out this week. Two items that will garner particular attention are personal consumption expenditures and the personal consumption expenditures price index. Consumer spending rose 1.1% in June, while consumer prices advanced 1.0%. It will be interesting to see if the PCE price index decreases in July in line with the other inflation indicators, such as the CPI, import and export prices, and the PPI.
Have a nice week!
Sincerely,
Robert G. Carpenter