Your Weekly Update for Monday, June 10, 2024.
Beacon Rock Wealth Advisors is a dba of BR Capital, Inc. is a financial planning and registered investment advisory firm in Camas, Washington. We are always available to answer your finance questions. Give us a call at (800) 562-7096 or send an email to [email protected].
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Mike Elerath
CERTIFIED FINANCIAL PLANNERTM
CERTIFIED IN LONG-TERM CARE
[email protected]
Bill Roller
NMLS #107972
CHARTERED FINANCIAL ANALYST
CERTIFIED FINANCIAL PLANNERTM
CHARTERED MARKET TECHNICIAN
[email protected]
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Summary
Markets were UP last week. The Dow Jones Industrial Average was UP 0.29% to 38,797.74 while the S&P500 ended UP 1.30% to 5,346.30. The Nasdaq Composite ROSE 2.37% to 17,132.27. The annual yield on the 30-year Treasury FELL 10.4 basis point(s) to 4.548.
Economic data for the week included gains in ISM services coupled with a decline in ISM manufacturing. The monthly employment situation report came in stronger than expected.
Equities earned positive results globally last week, led by the U.S. growth sector. Bonds also fared positively, as interest rates broadly declined. Commodities fell across the board last week.
Economic Notes
(-) The ISM manufacturing index for May fell back by -0.5 of a point to 48.7, below expectations calling for a slight increase to 49.5. This was a move further back into contraction, seen by a drop of -4 points for new orders to just above 45, while production fell just a point, but remained in expansion. On the bright side, employment rose several points back across neutral into expansion, above 50. Prices paid fell by -4 points but remained solidly expansionary, while the inventory index fell a fraction of a point further into contraction. Except for one month, this represents a streak of a year and a half in a manufacturing contraction. Goods activity has steadily fallen after the peak in March 2021, which coincided with when federal stimulus check payments were sent.
(+) The ISM services/non-manufacturing index rose by 4.4 points to 53.8 in May, rolling back into expansion, and exceeding the median forecast calling for 51.0. The underlying components were strong as well, with new orders up nearly two points further into expansion at over 54, while employment rose a point, but remained in contraction at 47. Supplier deliveries rose by four points back into expansion, while prices paid fell a point, but remained solidly expansionary. Services have behaved as a mirror image of manufacturing, and also represent a far larger proportion of the overall economy. Following a brief one-month foray into contraction, services are solidly growing again, which has gone along with the continued soft landing narrative and recessionary impulses kept at bay.
(-) Construction spending fell by -0.1% in April, contrary to the median forecast calling for a 0.2% increase, with substantial upward revisions several months back that have skewed the comparative numbers a bit. Under the hood, public spending fell in both residential and non-residential, as did private non-residential, while private residential spending ticked up a tenth. As costs fell by -0.6%, ‘real’ construction spending fell much more dramatically.
(-/0) Initial jobless claims for the Jun. 1 ending week rose by 8k to 229k, above the 220k median forecast. Continuing claims for the May 25 week rose by 2k to 1.792 mil., just above the 1.790 mil. unchanged level expected. Few extreme readings or outliers were noted, other than the Memorial Day holiday, which skews claims figures, and an insurance policy change in MN. Otherwise, conditions still point to a benign environment.
(-) The government JOLTs job openings report for April saw a decline of -296k to 8.059 mil., well below the slight decline expected to 8.350 mil. The largest declines were in health care (-204k), accommodation/food services (-97k), and education (state/local, -59k); the largest gains were in professional/business services (122k), education services (50k), and retail trade (21k). In terms of additions, the job openings rate fell back by -0.2% to 4.8%, while the hiring rate was flat at 3.6%. On the departure side, the quits and layoff rates were unchanged, at 2.2% and 1.0%, respectively. From a long-term standpoint (last 20 years), JOLTs points to the U.S. labor market continuing to appear tight, with less than 1.0 unemployed persons per job opening, although it’s been steadily rising again towards the 1.0 level.
(+) The employment situation report for May came in stronger than expected (again), likely disappointing the Fed and others hoping for weakness to justify near-term interest rate cuts. Nonfarm payrolls rose by 272k, beating the median forecast calling for 180k, with a handful of revisions dropping job gains for the prior two months by only -15k. Gains were strong across industries within the report, led by health care/social assistance (84k), government (43k), leisure/hospitality (42k), professional/business services (33k), and retail (13k). Declines were seen in mining and durable goods manufacturing, but most other segments were little-changed statistically.
The unemployment rate ticked up a notch to 4.0%, versus expectations for no change. The U-6 underemployment rate was flat at 7.4%. The entire survey was affected by a drop of -0.2% in labor force participation (representing -250k actual jobs). The related household survey component showed underlying weakness, with a decrease of -408k jobs, the bulk of which fell in the category of workers aged 20-24. The disconnect is unusual, but the surge in recent immigration has been noted as a possible cause, and perhaps early summer seasonal effects.
Average hourly earnings rose by 0.4% for the month, exceeding the 0.3% expected, led by gains in production jobs and ‘other’ services. This led to year-over-year earnings reaccelerating by 0.2% to 4.0%. Average manufacturing hours were steady at 34.3.
In an earlier report, nonfarm productivity for Q1 was revised down by a tenth to an annualized rate of 0.2%, which outperformed expectations of a revision down to zero. Over the past 12 months, productivity was unchanged at 2.9%, which is still nearly twice the pace since the beginning of the pandemic. Unit labor costs were revised down by -0.7% to an annualized rate of 4.0%, well below expectations of an upward revision just below 5.0%. The year-over-year labor cost change was also revised down, by half, by 0.9%. This appears to demonstrate some fading inflation impulses.
Market Notes
| Period ending 6/7/2024 | 1 Week % | YTD % |
| DJIA | 0.33 | 3.86 |
| S&P 500 | 1.36 | 12.81 |
| NASDAQ | 2.40 | 14.51 |
| Russell 2000 | -2.07 | 0.56 |
| MSCI-EAFE | 0.61 | 7.72 |
| MSCI-EM | 2.36 | 5.85 |
| Bloomberg U.S. Aggregate | 0.44 | -1.21 |
| U.S. Treasury Yields | 3 Mo. | 2 Yr. | 5 Yr. | 10 Yr. | 30 Yr. |
| 12/31/2023 | 5.40 | 4.23 | 3.84 | 3.88 | 4.03 |
| 5/31/2024 | 5.46 | 4.89 | 4.52 | 4.51 | 4.65 |
| 6/7/2024 | 5.52 | 4.87 | 4.46 | 4.43 | 4.55 |
U.S. stocks fared positively again last week, with investors digesting the mix of economic data. Interestingly, despite a weaker start Fri., stocks shrugged off the strong May employment report, although the strength implied a longer timeline for a Fed pause. By sector, leaders were technology (with strength in Nvidia, helped by the release of a new generation of chips, and perhaps also by a 10-for-1 stock split) and health care, with gains of 4% and 2%, respectively, followed by communications and consumer discretionary; utilities and energy lagged with declines of over -3%. Real estate was little changed, despite the fall in interest rates during the week. Large caps outperformed small caps.
Foreign stocks were mixed, with declines in developed markets, mostly in the U.K. The Bank of Canada chose to cut rates last week, as did the European Central Bank later—the latter by a quarter-point down to 3.75%. There was one ECB dissenter, in keeping with the more hawkish tone, with inflation still higher than many would care to see, along with wage growth running at just under 5%. Since its 1999 inception, this was the first instance of the ECB cutting rates before the U.S. Fed did, and it appeared to be a hesitant cut, with the press conference afterward a bit non-committal to future policy moves.
Emerging markets saw gains on net, led by positive weeks in Taiwan and Korea that offset a dramatic week elsewhere, with several key elections driving sentiment. Indian stocks lost over -5% post-election as the majority supporting PM Modi appeared tighter than the landslide expected, as well as parliamentary gains from opposing parties. However, the shock wore off by Friday, with gains of nearly 4% as the narrative of the benefits of a more balanced democratic government took hold. On the other hand, Mexico’s landslide election gave significant power to a single party, and fears of a return to an autocratic past that were prone to periodic crises, leading to double-digit equity declines in USD terms, as the currency was impacted more than the local stock market. South African elections ended up being less extreme than expected, which helped equity and currency returns, but the week still ended negatively.
Bonds fared positively last week, as yields fell across the curve. U.S. Treasuries led, followed by investment-grade corporates, although high yield bonds also gained to some extent. Foreign bonds were mixed along with a stronger dollar (influenced by ECB rate cut activity).
Commodities generally fell back last week, along with a stronger U.S. dollar, with industrial metals faring worse than other categories, down -4%. Crude oil prices declined -2% last week to $76/barrel, as OPEC+ decided on a complex set of updated rules, which included removing voluntary supply cuts later this year, sooner than expected, and potentially opens the floodgates for additional supply. All else equal, some countries would prefer to over-produce (at the expense of other countries) to maximize revenue, even though overall higher production can dampen prices, so incentives in the space can be tricky. Natural gas prices spiked 13% as weather conditions heated up.
Mortgage Rates
“Mortgage rates retreated this week given incoming data showing slower growth,” said Sam Khater, Freddie Mac’s Chief Economist. “Rates are just shy of seven percent, and we expect them to modestly decline over the remainder of 2024. If a potential buyer is looking to buy a home this year, waiting for lower rates may result in small savings, but shopping around for the best rate remains tremendously beneficial.”
The 30-year FRM averaged 6.99 percent as of June 6, 2024, down from last week when it averaged 7.03 percent. A year ago at this time, the 30-year FRM averaged 6.71 percent.
The 15-year FRM averaged 6.29 percent, down from last week when it averaged 6.36 percent. A year ago at this time, the 15-year FRM averaged 6.07 percent.
Freddie Mac’s Primary Mortgage Market Survey® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey.
Through our relationship with Mortgage Window, Inc. (NMLS#2485156) in Vancouver, Washington we originate residential and reverse mortgages.
Selected Cryptocurrencies
| Symbol | Name | Price | 24h % | 7d % | Market Cap | Volume(24h) |
| BTC | Bitcoin | $69,412.53 | -0.08% | 0.00% | $1,368,148,047,625 | $16,682,839,011 |
| ETH | Ethereum | $3,675.84 | -0.55% | -3.72% | $441,667,543,949 | $9,147,356,083 |
| BNB | BNB | $641.34 | -5.75% | 1.69% | $94,652,205,709 | $2,471,718,803 |
| SOL | Solana | $158.98 | -0.28% | -3.98% | $73,257,309,271 | $1,548,422,591 |
| XRP | XRP | $0.50 | 0.52% | -4.38% | $27,591,135,140 | $908,794,132 |
| DOGE | Dogecoin | $0.14 | -0.88% | -10.75% | $20,947,398,022 | $682,267,563 |
| TON | Toncoin | $7.08 | -0.46% | 7.11% | $17,212,968,654 | $221,152,635 |
| ADA | Cardano | $0.45 | 1.16% | -1.88% | $15,916,420,131 | $409,340,183 |
| SHIB | Shiba Inu | $0.00 | -0.04% | -7.65% | $13,648,834,115 | $481,260,609 |
| AVAX | Avalanche | $32.63 | 1.02% | -9.33% | $12,833,235,079 | $282,434,679 |
| TRX | TRON | $0.12 | 0.12% | 2.51% | $10,173,252,839 | $317,572,215 |
| LINK | Chainlink | $15.95 | -0.18% | -12.32% | $9,365,931,828 | $264,693,530 |
| DOT | Polkadot | $6.45 | -0.22% | -9.48% | $9,271,000,328 | $209,341,134 |
| BCH | Bitcoin Cash | $466.69 | -0.52% | -0.03% | $9,201,997,383 | $267,798,814 |
| NEAR | NEAR Protocol | $6.40 | -2.33% | -11.89% | $6,936,076,700 | $280,884,423 |
| MATIC | Polygon | $0.65 | -0.97% | -8.96% | $6,388,229,006 | $304,220,846 |
| LTC | Litecoin | $79.26 | -1.14% | -5.31% | $5,915,126,346 | $320,603,053 |
| UNI | Uniswap | $9.84 | -0.78% | 2.04% | $5,903,860,486 | $185,067,915 |
Information current as of 5:40 AM PDT, Monday, June 10, 2024. Source: https://coinmarketcap.com
Check us out at https://beaconrwa.com and our affiliated websites at https://reverse-mortgages.us and https://socialsecurityquestionsanswered4u.com.
Sources: Ryan Long, CFA, FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management,
MarketfieldAsset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, PIMCO, Standard & Poor’s, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.
Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.