By Bill Hornbarger, Chief Investment Officer
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Three Things to Watch
- The data calendar is relatively light this week, which will leave the markets focused on positioning after last week’s weak Institute for Supply Management (ISM) manufacturing and employment reports. While stocks fell, bonds rallied sharply, and the yield-curve inversion (two years versus 10 years) is at the lowest level this calendar year at 9 basis points. Steepening after a period of inversion is often a precursor of a slowing economy/recession.
- The ISM non-manufacturing report will be released Monday morning with a consensus forecast of 51 after a very soft (48.8) print for June. Employment and new orders will be closely watched after very weak readings last month. The index has been steadily softening for close to a year.
- Earnings season is winding down for the second quarter. With about 75% of S&P 500 companies having reported, almost 80% have reported positive earnings surprises (slightly better than average), but the aggregate surprise is 5.2% (slightly below average). This week will feature earnings from Uber, Walt Disney, Tyson Foods, Caterpillar and Airbnb.
Three Things to Know
- On Monday, August 6, 1945, Enola Gay dropped the first nuclear weapon on the Japanese city of Hiroshima, directly killing at least 70,000 people, including thousands of Korean slave laborers. Fewer than 10% of the casualties were military. By the end of the year, injury and radiation brought the total number of deaths to 90,000–140,000. The population before the bombing was around 345,000. About 70% of the city’s buildings were destroyed, and another 7% severely damaged. (Source; Wikipedia)
- Much of the weakness in the July employment report was due to weather. Approximately 1.54 million workers were either not working or only working part time due to weather, far above the historical average. (Source: Yardeni Research)
- Futures markets are now pricing in 115 basis points in interest rate cuts by the U.S. Federal Reserve’s December meeting. (Source: Bloomberg)
The above information reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security mentioned.