Market Perspective for August 6, 2023

On Monday, the Chicago Purchasing Managers Index (PMI) was released and came in at 42.8 percent, which indicates that economic conditions in one of the largest cities in America are contracting. The index was expected to come in at 43.3 percent, which would still have indicated that economic conditions were softening in that part of the country.

On Tuesday, the national manufacturing PMI numbers were released, and that survey came back at 46.4 percent, which was lower than the expected 46.9 percent. In addition, manufacturing prices PMI data was made available and came in at 42.6 percent compared to an expected 43.8 percent. The Job Openings and Labor Turnover Survey (JOLTS) report was also released that day, and it revealed that there were 9.68 million available positions in the United States.

On Wednesday, the ADP nonfarm employment change report was released, which is the precursor to the Bureau of Labor Statistics (BLS) report that was issued on Friday. The report from ADP found that the economy added 324,000 new jobs in the last month, which was higher than the expected 191,000 new jobs. Initially, it was believed that such a robust figure could open the door to additional rate hikes in the coming months.

However, that speculation would be dashed as new data came in on Thursday and Friday. Thursday saw the reveal of the services PMI report, which came in at 52.7 percent compared to 53.1 percent predicted by analysts prior to the release. Furthermore, unemployment claim data was released on Thursday morning, and the report revealed that 227,000 people had applied for benefits in the past week. This was compared to 221,000 a week ago and was also higher than the 226,000 claims analysts had expected to be filed in the past seven days.

Friday saw the release of the BLS nonfarm payroll report as well as monthly earnings and unemployment figures. In July, the economy added 187,000 jobs, which was lower than the 205,000 predicted by experts prior to Friday morning. It was also announced that June data was revised downward to 187,000 new jobs added from 209,000 when the report was first issued on July 7.

The unemployment rate dropped from 3.6 percent to 3.5 percent despite expectations that the number would remain the same. Average monthly earnings increased by .4 percent as opposed to the expected .3 percent. This means that there is still pressure on employers to continue hiking wages to compete in a historically tight labor market.

However, a slowdown in hiring has led some to say that the Fed should elect to keep rates where they are in September as opposed to an additional hike. The Fed Funds Rate is currently in a range between 5.25 percent and 5.5 percent. In addition, data indicates that most jobs are classified as part-time, which means that workers will make less overall even if they are paid slightly more per hour worked.

The S&P 500 was down 2.48 percent this week to finish at 4,478. On Monday, the market hit a high of 4,588 and remained steady on Tuesday. However, Wednesday saw the S&P 500 tumble to a weekly low of 4,486 that held until the end of the trading day on Friday.

As with the S&P 500, the Nasdaq was a net loser this week as it lost 3.11 percent over the last five trading days. It hit its high on Monday afternoon at 14,348 before hitting its low of the week on Thursday at 13,887. The market would rebound slightly on Friday to finish at 13,909.

Compared to the Nasdaq and S&P, the Dow had relatively smaller losses, finishing down a mere 1.28 percent at 35,065. The Dow would hit its high of the week on Tuesday morning at 35,657 and would continue to grind lower until the end of the trading day on Friday.

Over the coming days, investors will be awaiting the release of monthly and yearly Consumer Price Index (CPI) and monthly Producer Price Index (PPI) figures. It is believed that CPI on an annualized basis will increase to 3.3 percent from 3 percent in July while monthly CPI will increase by .2 percent. Prices are expected to have increased .2 percent since last month.

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