10 Things You Need To Know: July 11, 2023
Key data releases this week include: NFIB Small Business Optimism (Tue), CPI (Wed), Beige Book (Wed), PPI (Thu), and consumer sentiment (Fri).
July 6, 2023
Service sector business activity in the U.S. economy improved last month, according to the Institute for Supply Management. The ISM Services PMI rose to 53.9 in June from 50.3 in May. The index hit a low of 49.2 In December. While increased, the reading remained well below its peak of 67.6 in November 2021. The Action Economics Forecast Survey expected 51.3 for June.
July 7, 2023
Nonfarm payrolls increased 209,000 last month (2.4% y/y) after rising 306,000 in May and 217,000 in April, revised from 339,000 and 294,000, respectively. Expectations had been for a 225,000 rise in the Action Economics Forecast Survey. The unemployment rate, measured in the household survey, eased to 3.6% in June from 3.7% in May. Expectations had been for 3.7%.
Bloomberg, Financial Times
July 5, 2023, July 6, 2023
The Bank of England may have to raise interest rates as high as 7% to successfully tame inflation, JPMorgan economist Allan Monks wrote in a client note. Monks said that it “looks increasingly likely” the UK economy will see a hard landing and warned of “potential upside to rates if expectations do become unanchored or remain high.”
Financial Times, Wall Street Journal
July 9, 2023
Treasury Secretary Janet Yellen said there are signs of progress in US-China relations as she prepared to depart Beijing on Sunday. Yellen said the US does not intend to impose restrictions “that would have broad-based impacts on the Chinese economy” and that ties between the two countries are progressing. “I do think we’ve made some progress and I think we can have a healthy economic relationship that benefits both of us and the world,” Yellen said.
July 10, 2023
Here’s a sobering stat: Half of the expected S&P 500 earnings growth in the fourth quarter of 2023 will come from just four companies, according to FactSet. In its June 9 Earnings Insight report, the firm found that four percentage points of the 8.2% expected fourth-quarter index earnings growth comes from Meta, Nvidia, Alphabet, and Amazon. Without these stocks, S&P earnings growth in the final quarter of the year is estimated to be 4.2%.
July 10, 2023
Over the past 30 years of Fed rate cuts, investors benefited from lengthening their bond exposure between the time when the 10-year Treasury note yield peaks and the Fed starts cutting rates. The 10-year note yield likely peaked in October at around 4.2%. It’s currently at 4%. If the playbook follows the last four cycles, this would be a good time to start moving out your duration.
July 5, 2023
Minutes from June’s FOMC meeting revealed that “almost all” participating officials believe that “additional increases” in the benchmark interest rate are warranted, citing a tight labor market and upside risks to inflation as key factors influencing the outlook.
Wall Street Journal
July 7, 2023
For the first half of 2023, automakers sold 557,330 electric vehicles with the growth rate far eclipsing that of conventional cars. Sales of internal-combustion-engine vehicles grew by about 10% in the period. EVs are a small but rapidly expanding part of the new-vehicle market, accounting for 7.2% of overall sales in the January-to-June period, up from 5.4% a year earlier.
July 10, 2023
The seemingly unstoppable growth of megacaps like Apple Inc. and Microsoft Corp. mean they have breached an upper limit imposed on stocks in the Nasdaq 100. As a result, Nasdaq Inc. has announced a “special rebalance” — the first ever of its kind — will be carried out to redistribute the weight of the index’s members. The index provider says the July 24 adjustment will “address overconcentration in the index by redistributing the weights.”