A Mixed End to the First Week of August…..
U.S. equities end mixed, but still post a weekly gain, after a better-than expected July labor report provided some optimism, but also uncertainty over what it could mean for future Fed tapering. The July nonfarm payrolls report was the day’s headlining event and added to some upbeat sentiment, as the report came in well above expectations and showed that the unemployment rate fell, however private sector jobs missed the mark. Investors appeared to have a mixed reaction to the report as questions quickly arose over the possible impact the report could have on the Fed’s tapering decisions. Meanwhile, another busy week on the earnings front wrapped up, as Expedia Group, News Corp. and Shake Shack all bested expectations, but Beyond Meat’s quarterly loss was wider than forecasts. In other economic news, wholesale inventories were revised higher and consumer credit surged for the second month in a row. Treasuries were lower following the jobs report, putting upward pressure on yields, and the U.S. dollar accelerated to the upside, while gold tumbled and crude oil prices were also lower. Asia finished mixed in another lackluster session, while stocks in Europe finished mostly higher following the U.S. labor report.
The Dow Jones Industrial Average (DJIA) gained 144 points (0.4%) to 35,209, the S&P 500 Index added 7 points (0.2%) to 4,437, while the Nasdaq Composite decreased 59 points (0.4%) to 14,836. In moderate volume, 755 million shares were traded on the NYSE and 4.1 billion shares changed hands on the Nasdaq. WTI crude oil moved $0.81 lower to $68.28 per barrel. Elsewhere, the gold spot price plunged $45.80 to $1,763.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.6% to 92.79. Markets were higher for the week, as the DJIA rose 0.8%, the S&P 500 moved 0.9% higher, and the Nasdaq Composite gained 1.1%.
Nonfarm payrolls rose by 943,000 jobs month-over-month (m/m) in July, compared to the Bloomberg consensus estimate of an 858,000 rise, and following June’s upwardly-adjusted increase of 938,000. Excluding government hiring and firing, private sector payrolls increased by 703,000, versus the forecasted rise of 709,000, after increasing by an upwardly-revised 769,000 in June. The labor force participation rate ticked higher to 61.7% from June’s 61.6% rate, and matching forecasts.
The unemployment rate fell to 5.4% from June’s 5.9% rate, compared to expectations of a decrease to 5.7%. The underemployment rate—including total unemployed and those employed part time for economic reasons, along with people who are marginally attached to the labor force—declined to 9.2% from the prior month’s 9.8% rate. Average hourly earnings rose 0.4% m/m, ahead of projections for a 0.3% increase, and matching June’s upwardly-adjusted 0.4% rise. Y/Y, wages were 4.0% higher, above the 3.9% forecast. Finally, average weekly hours matched June’s upwardly-revised 34.8, versus estimates of a reading of 34.7 hours.
June wholesale inventories were revised higher to a 1.1% month-over-month (m/m) gain, versus the Bloomberg estimate calling for it to match May’s unrevised 0.8% increase. Sales rose 2.0% after May’s unadjusted 0.8% gain.
Consumer credit, released in the final hour of trading, showed consumer borrowing increased by $37.6 billion during June, well north of the $23.0 billion increase that was forecasted of economists polled by Bloomberg, while May’s figure was adjusted upward to an expansion of $36.7 billion from the originally reported $35.3 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, rose by $19.8 billion, a 7.2% y/y rise, while revolving debt, which includes credit cards, advanced by $17.8 billion, a 22.0% y/y rise.
Treasuries were lower following the jobs report, as the yield on the 2-year note was up 1 basis point (bp) at 0.21%, the yield on the 10-year note was 8 bps higher at 1.30%, and the 30-year bond rate gained 9 bps at 1.95%.
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