Chief Economist Scott Brown discusses the latest market data.
The economic calendar was thin. Investors remained concerned about rising cases of COVID-19. A return to a full lockdown appears unlikely, but the pace of improvement in the economy is expected to slow.
The ISM Non-Manufacturing Index rose to 57.1 in June, vs. 41.8 in April and 45.4 in May (a figure above 50 indicates expansion). The report showed business activity and new orders rebounding sharply, but employment continued to decline (less than in the two previous months). Jobless claims fell to 1.314 million, a larger-than-expected decline. However, claims figures are often quirky around major holidays and the level remains elevated. The Producer Price Index (PPI) fell 0.2% in June, largely reflecting a drop in food prices (following a surge in May). Ex-food, energy and trade services, the PPI rose 0.3% (-0.1% y/y).
Next week, the mid-month economic data reports are expected to reflect further improvement in the economy, but investors are likely to keep a close eye on the escalation in COVID-19 cases. Treasury will report another whopping budget deficit. Higher gasoline prices should add to the headline Consumer Price Index figure in June, but core inflation is expected to remain mild. Industrial production should pick up, reflecting a broad-based rebound in factory activity. Jobless claims will remain subject to seasonal distortions (the Independence Day holiday, the end of the school year), but the trend should remain lower (although still uncomfortably high). Retail sales are expected to have risen further, partly reflecting pent-up demand from the lockdown period. Residential construction figures are likely to be mixed (watch single-family permits).
|Last||Last Week||YTD return %|
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.2606||1.250|
|Dollars per Euro||1.1285||1.125|
|Japanese Yen per Dollar||107.20||108.46|
|Canadian Dollars per Dollar||1.359||1.308|
|Mexican Peso per Dollar||22.621||19.139|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.28||1.30|
As of close of business 07/09/2020
|July 13||—||Treasury Budget (June)|
|July 14||—||Consumer Price Index (June)|
|July 15||—||Tax Day|
|—||Import Prices (June)|
|—||Industrial Production (June)|
|—||Fed Beige Book|
|July 16||—||Jobless Claims (week ending July 11)|
|—||Retail Sales (June)|
|—||Homebuilder Sentiment (June)|
|July 17||—||Building Permits, Housing Starts (June)|
|—||UM Consumer Sentiment (mid-July)|
|July 22||—||Existing Home Sales (June)|
|July 24||—||New Home Sales (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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