July 29 – Stocks have turned red at mid-day after the S&P 500 and Nasdaq both reached fresh record highs earlier in the session, with a plethora of U.S. economic data to parse through today and more on tap later this week in addition to the FOMC meeting. The losses are nothing major, with the major indexes down anywhere from 0.10% - 0.40% at the time of writing while the VIX remains muted just above 15. The dollar is trading at a five-week high, adding to yesterday’s gains in the wake of the U.S. / E.U. agreement, breaking above the 99 level for the first time since June 23rd earlier in the session but now hovering just below it. Treasuries are down slightly, with 10-year yields trading at 4.35% and 2-year yields trading just above 3.89%. Crude oil is adding to yesterday’s gains, with nearby WTI trading at a fresh two-week high around the $68.70 level. The ags are mostly lower again today, save for the cattle complex as both feeder and live cattle futures trade at or near all-time highs yet again.
Job openings in the U.S. fell by 275k month-on-month to 7.437 million in June, coming in below market expectations, while May was revised 57k lower to 7.712 million. Job quits fell to their lowest since December at 3.142 million, lower than expected, while May also saw a downward revision from the 3.293 million initially reported to 3.270 million. The largest declines in job openings were seen in accommodation and food services (-308k), health care and social assistance (-244k), and finance and insurance (-142k). The largest gains were seen in retail trade (+190k), information (+67k), and state and local government education (+61k). Today kicks off a big week of labor data, with Challenger Job Cuts and weekly Jobless Claims both due out Thursday morning and the all-important July Nonfarm Payrolls following up on Friday. These readings will be watched very closely by the Fed as they monitor the maximum employment portion of their dual mandate, potentially setting the tone for their outlook at next month’s Jackson Hole Economic Symposium. Remember, it was at this even last year that Fed Chair Jerome Powell took a notably harder stance on labor market risks following a minor uptick in unemployment seen at the time.
Average single-family house prices are still rising in the U.S., but at a slowing rate as high interest rates and ongoing economic uncertainty keeps prospective buyers on the sidelines. There were two different home price indexes released this morning for the month of May, with the Federal Housing Finance Agency (FHFA) showing a 0.2% month-on-month decline while the S&P Case-Shiller Home Price Index showed a 0.4% month-on-month increase. Interestingly, both indexes showed a 2.8% year-on-year rise which was right in line with analyst estimates for the FHFA reading but slightly below the expected +3.0% for S&P Case-Shiller. While this still sounds like a reasonable gain, it’s worth noting that this was the weakest year-over-year gain in home prices seen since August 2023 for the S&P Case-Shiller index and the weakest for the FHFA metric since April 2012.
U.S. consumer sentiment continues to improve, with this morning’s Conference Board Consumer Confidence Index rising to 97.2 in July, well above market expectations of 95.8, while June was revised higher from 93.0 to 95.2. This improvement was a combination of the Present Situation Index falling 1.5 points month-on-month to 131.5 but the Expectations Index more than offsetting the decline with a 4.5-point rise to 74.4. On another positive note, consumers’ 12-month inflation expectations declined to 5.8% in July, down slightly from the 5.9% seen in June. That would obviously still be very high inflation relative to current levels but represents a notable decline from April’s peak at 7.0% and reflects an improvement from the “worst case scenario” type thinking seen at the consumer level this spring. Purchasing plans for homes (and cars) did decline further in July, however, coinciding with the softening demand picture outlined above.
Today was the Texas service sector’s turn to impress, with this morning’s July Services Business Index from the Dallas Fed rising into expansionary territory for the first time since February with a 2.0 reading, up from the -4.4 seen in June and a notable rebound from the recent low of -19.4 seen in April. This follows yesterday's largely better-than-expected data from the Dallas Fed on the manufacturing side. The Services Revenues subindex saw an impressive 10.4-point month-on-month jump in July to return to expansionary territory with a 6.3 reading, marking the best performance seen since March. On the labor side, both employment and wages in Texas’s service sector saw gains relative to the month prior, though there were some potential inflationary warning signs as well. Most notably, the Input Price subindex rose to 25.3 in July, up from 21.3 in June, while looking at the retail sector specifically, the Input Price subindex rose to 31.6 in July from the 17.5 seen in June. However, both sides did see slight month-on-month declines in the Selling Prices portions, providing something of a silver lining. We’ll get another fresh look at the U.S. inflation picture with the Fed’s preferred metric, PCE, due out on Thursday.
