Weekly Market Commentary August 2nd to August 6th 2021
The July ISM Manufacturing Index fell below 60 for the first time since January coming in at 59.5. Although this reading was below estimates, it still indicates extremely solid manufacturing demand. Supplier delivery times and prices paid both fell on the month suggesting supply side bottlenecks are improving, albeit very slowly.
The ISM Services Index rose to 64.1 in July, well above estimates and last month’s reading of 60.1. As with the manufacturing index supply chain bottlenecks are a persistent issue. The positive is that the employment component of this report rose 4.5 points suggesting employers are adding back workers to meet demand.
Nonfarm Payrolls exceeded expectations with employers adding 943,000 jobs in July. June’s reading was revised significantly upward to 938,000 from 850,000. Private Payrolls increased by 703,000 led by leisure and hospitality, which increased by 380,000. The Unemployment Rate dropped to 5.4% while the Participation Rate ticked up slightly to 61.7%. Average Hourly Earnings rose 0.4% in July and 4.6% from this time last year. New Jobless Claims fell to 385k while continuing claims fell to 2,930k, a bigger than expected drop.
Markets reacted favorably to Friday’s employment news with all three indices finishing positive for the week. The S&P 500 rose 0.9% ending the week at 4,437 while the DJIA and NASDAQ rose 0.8% and 1.1%, respectively. The 10-Year U.S Treasury yield had another turbulent week before settling at 1.29%, up slightly from last week.
Next week is all about inflation; we’ll get the latest readings for Consumer and Producer Prices.