Your Weekly Update for Monday, August 12, 2024.
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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 DOWN SLIGHTLY last week. The Dow Jones Industrial Average was DOWN 0.63% to 39,469.03 while the S&P500 ended DOWN 0.05% to 5,343.97. The Nasdaq Composite FELL 0.17% to 16,745.67. The annual yield on the 30-year Treasury ROSE 11.6 basis point(s) to 4.225%.
In a week of limited economic data, reports included improvement in ISM services indexes, while jobless claims fell back from recent higher levels.
Equities continued to experience the highest levels of volatility in months, with a net result of little change for the week in the U.S. and small gains in foreign markets. Bonds fell back generally, along with a backup in yields. Commodities saw gains, led by crude oil as demand worries faded a bit.
Economic Notes
(+) The ISM services/non-manufacturing index rose 2.6 points in July to 51.4, exceeding the 51.0 median forecast and moving up from contraction back into the zone of expansion. Underlying activity generally improved also, with business activity, new orders, and employment all up around five points each back into expansion. Prices paid ticked back up by nearly a point to 57, while supplier deliveries fell nearly -5 points back into a contractionary 48. The final release for July S&P Global U.S. service PMIÂ was revised down by a point to a still-very expansionary 55.0, with key components also showing strength. These services data points were a positive offset to the mixed results from the prior week, which began to raise near-term questions about the strength of the U.S. economy.
(+/0) Initial jobless claims for the Aug. 3 ending week fell by -17k to 233k, below the 240k median forecast. Continuing claims for the Ju1. 27 week rose by 6k to 1.875 mil., matching consensus expectations. The initial claims number was led by declines in MI and TX, which would point to a continued reversal of temporary job losses from auto plant maintenance shutdowns and the hurricane.
Market Notes
| Period ending 8/9/2024 | 1 Week % | YTD % |
| DJIA | -0.56 | 5.95 |
| S&P 500 | -0.02 | 12.96 |
| NASDAQ | -0.17 | 12.00 |
| Russell 2000 | -1.32 | 3.48 |
| MSCI-EAFE | -0.29 | 4.05 |
| MSCI-EM | 0.27 | 5.77 |
| Bloomberg U.S. Aggregate | -0.82 | 2.36 |
| 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 |
| 8/2/2024 | 5.29 | 3.88 | 3.62 | 3.80 | 4.11 |
| 8/9/2024 | 5.33 | 4.05 | 3.80 | 3.94 | 4.23 |
U.S. stocks experienced one of the more interesting weeks in some timeâin fact, it featured the single worst and single best days since 2022. By sector, industrials and energy led with gains of over a percent each, while laggards included materials and consumer discretionary (Tesla and McDonaldâs), each down over -1%. Real estate fell back only slightly, despite the sharp rise in yields, which also negatively affected small caps broadly.
The -3% rout for the S&P 500 on Mon. started with a -12% overnight decline in Japanese markets, as global markets begun unwind the long-beneficial borrowing in yen, as well as recalibrating recession odds after the weak U.S. employment report the prior week. While the employment report wasnât a bad one, extended valuations in U.S. stocks lowered the bar for higher volatility, which can easy carry to other time zones in a rolling fashionâseveral reasons at once can accelerate such negativity. Sentiment improved by Tue., with markets recovering a significant portion of the earlier decline. By Thu., financial markets took the reversal downward in jobless claims as positive news leading to a 2%+ gain. This was due to the financial markets now apparently better understanding the temporary nature of layoffs from the prior nonfarm payroll report and more recent claims. The S&P just avoided a -10% correction from mid-July highs, while the Nasdaq had fallen by -15%, before recovery. After moving along at below average levels most of the year (under 20), the VIX spiked at over 65 briefly, before falling back.
Foreign stocks held up better, with gains in Japan and Europe, offset by a decline in the U.K. Emerging markets fared best, rising over a percent on the week, led by a sharp gain in Brazil along with weak reported fundamentals raising hopes for more rate cuts, with other key countries mixed. Japan was assumed to be behind much of the early week market turmoil, with the BOJâs more hawkish policiesâmoving away from quantitative easing. As a tangible effect, this has reduced the attractiveness for investors taking advantage of the âcarry trade,â of borrowing in yen at low rates and investing elsewhere, usually in foreign markets. (U.S. tech stocks and Mexican bonds with high yields have been notable favorites.) As domestic rates have risen, this has caused a cascade effect of that spread becoming less attractive, pushing the yen higher, making margin calls more frequent, and causing disruption from a transactional standpoint (forced sales are never great for market liquidity). On the positive side, the BOJ relented with comments that it will not raise the policy interest rate further âwhen financial and capital markets are unstable,â which appeared to appease global investors. With more detail on the Chinese governmentâs Third Plenum coming out, itâs become apparent additional programs are being rolled out to address weak domestic consumption. Like a similar âcash for clunkersâ program that encourages the purchase of electric cars, the new initiative is promoting replacement of household appliances. This seems to be representative of more targeted policies used by the government as of late, rather than casting a wide net of stimulus.
Bonds fell back last week, along with higher yields along the U.S. Treasury curve as early fears waned as the week went on. Investment-grade corporates outperformed governments slightly, while high yield and floating rate bank loans earned small gains. Foreign bonds were mixed, with little change in the U.S. dollar during the week.
Commodities gained for the week, led by energy and agriculture. Crude oil rose over 3% last week to $77/barrel, as U.S. labor concerns abated, coupled with a 13% spike in natural gas prices, as seasonal summer maintenance shutdowns reduced production.
Mortgage Rates
âMortgage rates plunged this week to their lowest level in over a year following the likely overreaction to a less than favorable employment report and financial market turbulence for an economy that remains on solid footing,” said Sam Khater, Freddie Mac’s Chief Economist. “The decline in mortgage rates does increase prospective homebuyersâ purchasing power and should begin to pique their interest in making a move. Additionally, this drop in rates is already providing some existing homeowners the opportunity to refinance, with the refinance share of market mortgage applications reaching nearly 42 percent, the highest since March 2022.â
The 30-year FRM averaged 6.47 percent as of August 8, 2024, down from last week when it averaged 6.73 percent. A year ago at this time, the 30-year FRM averaged 6.96 percent.
The 15-year FRM averaged 5.63 percent, down from last week when it averaged 5.99 percent. A year ago at this time, the 15-year FRM averaged 6.34 percent.
Freddie Macâs Primary Mortgage Market SurveyÂŽ 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. Â (NMLS#2485156) in Vancouver, Washington we originate residential and reverse mortgages.
Selected Cryptocurrencies
| Symbol | Name | Price | 24h % | 7d % | Market Cap | Volume(24h) |
| BTC | Bitcoin | $59,706.28 | -1.11% | 18.60% | $1,178,537,864,075 | $30,339,423,185 |
| ETH | Ethereum | $2,684.58 | 2.07% | 19.74% | $322,875,630,648 | $17,350,698,618 |
| BNB | BNB | $517.20 | -0.82% | 24.73% | $75,477,661,453 | $1,700,585,513 |
| SOL | Solana | $148.98 | -1.43% | 31.97% | $69,533,588,980 | $3,294,717,899 |
| XRP | XRP | $0.58 | 0.19% | 30.20% | $32,312,110,127 | $1,483,996,278 |
| TON | Toncoin | $6.60 | 2.98% | 33.20% | $16,625,511,998 | $429,842,838 |
| DOGE | Dogecoin | $0.11 | 0.48% | 27.07% | $15,381,319,972 | $682,465,549 |
| ADA | Cardano | $0.34 | -1.09% | 17.76% | $12,258,685,894 | $246,188,567 |
| TRX | TRON | $0.13 | -0.98% | 7.22% | $11,056,682,103 | $247,348,495 |
| AVAX | Avalanche | $21.52 | 0.03% | 20.21% | $8,501,488,249 | $204,053,515 |
| SHIB | Shiba Inu | $0.00 | 0.22% | 25.08% | $8,246,800,557 | $230,122,120 |
| DOT | Polkadot | $4.64 | -0.51% | 20.16% | $6,869,874,431 | $104,259,117 |
| BCH | Bitcoin Cash | $346.81 | 0.04% | 21.32% | $6,847,998,719 | $224,001,770 |
| LINK | Chainlink | $10.60 | 1.36% | 26.41% | $6,443,401,413 | $225,126,614 |
| LEO | UNUS SED LEO | $5.79 | -0.28% | 2.85% | $5,363,346,780 | $1,652,031 |
| LTC | Litecoin | $61.16 | 0.34% | 18.68% | $4,577,924,481 | $274,598,943 |
| NEAR | NEAR Protocol | $4.08 | 1.82% | 26.55% | $4,529,026,990 | $212,121,895 |
Information current as of 6:10 AM PDT, Monday, August 12, 2024. Source: https://coinmarketcap.com
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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 & Poorâs, 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.