Market Summary: Quarterly Review April - June 2024

Latest Economic Reports

• Employment: Total employment increased by 272,000 in May, following a net downward revision over the previous two months. The May jobs increase was well above expectations. Employment trended up in health care, government, leisure and hospitality, and professional, scientific, and technical services. In May, the unemployment rate increased 0.1 percentage point to 4.0% and was 0.3 percentage point above the rate from a year earlier (3.7%). The number of unemployed persons was relatively unchanged at 6.6 million. In May, the number of long-term unemployed (those jobless for 27 weeks or more), at 1.4 million, accounted for 20.7% of all unemployed people. The labor force participation rate, at 62.5%, was 0.2 percentage point below the prior month's estimate, while the employment-population ratio dipped 0.1 percentage point to 60.1% in May. In May, average hourly earnings increased by $0.14, or 0.4%, to $34.91. Since May 2023, average hourly earnings rose by 4.1%, which is up from the April figure of 3.9%. The average workweek was unchanged at 34.3 hours in May.
• There were 233,000 initial claims for unemployment insurance for the week ended June 22, 2024. During the same period, the total number of workers receiving unemployment insurance was 1,839,000. A year ago, there were 238,000 initial claims, while the total number of workers receiving unemployment insurance was 1,750,000.
• FOMC/interest rates: The Federal Open Market Committee met twice in the second quarter, in May and in June. Following each of those meetings, the Committee kept interest rates at their current levels. Each time, the FOMC noted that the economy in general, and the labor market in particular, had remained steady, while inflation stayed well above the Fed's target rate of 2.0%. Overall, the FOMC maintained its hawkish stance toward lowering interest rates, with the possibility of one rate cut before the end of the year.
• GDP/budget: The economy, as measured by gross domestic product, accelerated at an annualized rate of 1.4% in the first quarter of 2024, according to the third and final estimate from the Bureau of Economic Analysis. GDP increased 3.4% in the fourth quarter. Personal consumption expenditures rose 1.5% in the first quarter compared to a 3.3% increase in the previous quarter. Consumer spending on goods dipped 2.3%, while spending on services rose 3.3%. Gross domestic investment rose 4.4% in the first quarter, well above the 0.7% increase in the fourth quarter. Nonresidential fixed investment advanced 4.4% in the first quarter (3.7% in the fourth quarter), while residential fixed investment increased 16.0% in the first quarter compared to a 2.8% increase in the fourth quarter. Exports inched up 1.6%, while imports, which are a negative in the calculation of GDP, increased 6.1%. Consumer prices increased 3.4% in the first quarter, compared with an increase of 1.8% in the previous quarter. Excluding food and energy prices, the PCE price index increased 3.7%, compared with an increase of 2.0% in the fourth quarter.
• The federal budget deficit in May was $347.0 billion, well above the May 2023 deficit of the $240.3 billion. April saw a budget surplus of $209.5 billion. In May, government receipts totaled $323.6 billion, while government outlays were $670.8 billion. Through the first eight months of fiscal year 2024, the total deficit sits at $1,202.3 trillion, which is roughly $37.0 billion higher than the deficit through the first eight months of the previous fiscal year.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report, personal income rose 0.5% in May (0.3% in April) and disposable personal income also increased 0.5%, up from 0.3% in April. The PCE price index was unchanged in May after rising 0.3% in each of the prior three months. The PCE price index excluding food and energy (core prices), ticked up 0.1% in May. Consumer prices rose 2.6% since May 2023, down 0.1 percentage point compared to the 12 months ended in April. Core prices increased 2.6% over the same period, 0.2 percentage points lower than the 12 months ended in April. Consumer spending rose 0.2% in May after advancing 0.1% in April.
• The Consumer Price Index was unchanged in May after rising 0.3% in April. Over the 12 months ended in May, the CPI rose 3.3%, down 0.1 percentage point from the period ended in April. Excluding food and energy, the CPI rose 0.2% in May, (0.3% in April), and 3.4% from May 2023. Increases in prices for shelter (0.4%) and food (-0.1%), particularly food away from home (0.4%), were offset by a decrease in prices for energy (-0.2%) and gasoline (-3.6%). In addition to advances in prices for shelter and food, May saw increases in prices for medical care, used cars and trucks, and education, while prices for airline fares, new vehicles, communication, recreation, and apparel were among those that declined.
• Prices that producers received for goods and services fell 0.2% in May after rising 0.5% in April. The May decline was attributable to a decrease in prices for goods (-0.8%), while prices for services were unchanged from the prior month. Nearly 60% of the May decrease in prices for goods can be traced to a 7.1% decline in prices for gasoline. Producer prices increased 2.2% for the 12 months ended in May, unchanged from the increase over the 12 months ended in April. Producer prices less foods, energy, and trade services were flat in May after increasing 0.5% in April. For the 12 months ended in May, prices less foods, energy, and trade services moved up 3.2%, the same increase as estimated for the 12 months ended in April.
• Housing: Sales of existing homes fell 0.7% in May and 2.8% over the last 12 months. According to the National Association of Realtors® (NAR), existing home sales have stagnated due to low inventory, rising home prices, and high interest rates. The median existing-home price was $419,300 in May, the highest price ever recorded. The May price was 3.1% above the April price of $406,600 and 5.8% higher than the May 2023 price of $396,500. Unsold inventory of existing homes in May represented a 3.7-month supply at the current sales pace, up slightly from 3.5 months in April. Sales of existing single-family homes decreased 0.8% in May and 2.1% from the prior year. The median existing single-family home price was $424,500 in May, up from $411,100 in April and well above the May 2023 estimate of $401,500. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.87% as of June 20, down from 6.95% the previous week but up from 6.67% one year ago.
• New single-family home sales also declined in May, falling 11.3% below the April pace and 16.5% under the May 2023 rate. The median sales price of new single-family houses sold in April was $417,400 ($417,900 in April). The May average sales price was $520,000 ($503,700 in April). The inventory of new single-family homes for sale in May represented a supply of 9.3 months at the current sales pace, up from 9.1 months in April.
• Manufacturing: Industrial production rose 0.9% in May, after being flat in April. Manufacturing output also increased 0.9% in May after declining 0.4% in April. Mining increased 0.3% in May, while utilities advanced 1.6%. For the 12 months ended in May, total industrial production advanced 0.4% from its year-earlier level. Over the same period, manufacturing increased 0.1%, mining decreased 0.4%, while utilities increased 3.9%
• New orders for durable goods rose 0.1% in May following a downwardly revised 0.2% April increase. Excluding transportation, new orders decreased 0.1% in May. Excluding defense, new orders fell 0.2%. New orders for transportation equipment advanced 0.6% in May, contributing to the overall increase in new orders. New orders for nondefense capital goods in May decreased 2.8%, while new orders for defense capital goods increased 22.6%.
• Imports and exports: U.S. import prices decreased 0.4% in May following a 0.9% advance in the previous month. The May decrease was the first monthly decline since December 2023. Import prices advanced 1.1% over the last 12 months, matching the April 12-month increase. The May and April 12-month advances were the largest 12 month increases since December 2022. Import fuel prices fell 2.0% in May after increasing 4.1% in April. Despite the May decrease, import fuel prices rose 7.9% over the past 12 months, the largest 12-month advance since December 2022. Import prices excluding fuel ticked down 0.3% in May, following a 0.7% rise the previous month. Export prices declined 0.6% in May after advancing 0.6% in April. The May decrease in exports was the first monthly decline since December 2023. Lower nonagricultural prices in May more than offset higher agricultural prices. Despite the drop in May, prices for exports rose 0.6% from May 2023 to May 2024, the first 12-month advance since January 2023.
• The international trade in goods deficit was $100.6 billion in May, up $2.7 billion, or 2.7%, from April. Exports of goods were $166.7 billion in May, $4.6 billion, or 2.7%, less than in April. Imports of goods were $267.3 billion in May, $2.0 billion, or 0.7%, under the April estimate. Since April 2023, exports increased 4.2%, while imports increased 3.2%.
• The latest information on international trade in goods and services, released June 6, is for April and revealed that the goods and services trade deficit was $74.6 billion, up $2.1 billion, or 8.7%, from the March deficit. April exports were $263.7 billion, 0.8% less than March exports. April imports were $338.2 billion, 2.4% more than March imports. Year to date, the goods and services deficit increased $5.5 billion, or 2.0%, from the same period in 2023. Exports increased $32.2 billion, or 3.2%. Imports increased $37.8 billion, or 2.9%.
• International markets: The United Kingdom's GDP expanded 0.7% in the first quarter, a little higher than expectations. It was the largest expansion in over two years, which signals an end to the economic recession that began last year. Canada's GDP rose 0.3% in April but is expected to slow to 0.1% growth in May. Eurozone inflation rose 0.2% in May and 2.6% over the last 12 months. Core prices advanced 2.9% for the year, 0.2 percentage points above the period ended in April. In China, retail sales rose 3.7%, ahead of expectations, while industrial production inched up 0.3%. For June, the STOXX Europe 600 Index fell 1.1%; the United Kingdom's FTSE lost 1.1%; Japan's Nikkei 225 Index advanced 2.9%; and China's Shanghai Composite Index fell 3.9%.
• Consumer confidence: Consumer confidence dipped in June to 100.4, down from 101.3 in May, according to the Conference Board Consumer Confidence Index®. The Present Situation Index, based on consumers' assessment of current business and labor market conditions, increased to 141.5 in June, up from 140.8 in the previous month. The Expectations Index, based on consumers' short-term outlook for income, business, and labor market conditions, fell to 73.0 in June, down from 74.9 in May. The Expectations Index has been below 80 (the threshold which usually signals a recession ahead) for five consecutive months.
  
  

Eye on the Quarter Ahead

Investors will likely focus much of their attention on the Federal Reserve during the third quarter of 2024. While the Fed has maintained interest rates at their current level for several months, they suggested that one decrease could be in the offing this year. Stock performance was choppy during the second quarter, with some indexes reaching record highs, only to fall back. Traders will look to the third quarter for more stability and steady gains in the market.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation);
U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Forecasts are based on current conditions, subject to change, and may not come to pass. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities and other bonds fluctuates with market conditions. Bonds are subject to inflation, interest-rate, and credit risks. As interest rates rise, bond prices typically fall. A bond sold or redeemed prior to maturity may be subject to loss. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.

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