Month of July 2021
Market Month: July 2021
The Markets (as of close July 30, 2021)
Stocks closed generally higher in July, despite a downturn at the end of the month. Second-quarter corporate earnings data was generally strong, although some megacap companies posted weaker-than-expected earnings results. Economic news was mostly favorable. The economy expanded at an annualized rate of 6.5%, 850,000 new jobs were added, while the number of new unemployment claims declined. Industrial production rose, as did new orders for durable goods.
The housing market showed signs of slowing from its torrid pace earlier in the year. Inflation continued torun hot as consumer prices jumped 0.9%. The Federal Reserve indicated that, while the economy continues to show signs of growth, the interest rate target range and bond-buying measures will remain in place for some time.
The major indexes enjoyed a strong month, led by the S&P 500. Only the Russell 2000 and the Global Dow failed to post monthly gains. Each of the benchmarks are well ahead of their 2020 year-end values, led by the S&P 500, followed by the Global Dow, the Dow, the Nasdaq, and the Russell 2000.
The market sectors ended the month generally higher, with health care (4.7%), real estate (4.6%), utilities (4.2%), and information technology (3.8%) advancing, while energy (-8.4%) and financial services (-0.6%) fell. Treasury yields, crude oil prices, and the dollar slid from the June closing values. Gold prices advanced.
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Last Month's Economic Reports
- Employment: Job growth in June exceeded expectations following the addition of 850,000 new jobs.
The May figure was revised up from 559,000 to 583,000. Overall, 1.7 million new jobs were added over
the second quarter of 2021. Notable job growth in June occurred in leisure and hospitality (+343,000),
with over half the job gain coming from food services and drinking places (+194,000). Job gains also
occurred in public and private education (+269,000), professional and business services (+72,000), and
retail trade (+67,000). In June, the unemployment rate inched up 0.1 percentage point to 5.9%, with the
number of unemployed persons rising by 168,000 to 9.5 million. These measures are down considerably
from their recent highs in April 2020 but remain well above their levels prior to the pandemic (3.5% and
5.7 million, respectively, in February 2020). Among the unemployed, the number of persons on
temporary layoff was essentially unchanged at 1.8 million. This measure is down considerably from the
recent high of 18.0 million in April 2020 but is 1.1 million higher than in February 2020. The number of
job leavers, that is, unemployed persons who quit or voluntarily left their previous job and began looking
for new employment, increased by 164,000 to 942,000 in June. In June, the number of persons not in
the labor force who currently want a job was 6.4 million, little changed over the month but up by 1.4
million since February 2020. In June, the number of employed persons who teleworked because of the
pandemic fell to 14.4%, down from 16.6% in the prior month. In June, 6.2 million persons reported that
they had been unable to work because their employer closed or lost business due to the pandemic. This
measure is down from 7.9 million in May. in June, the labor force participation rate and the
employment-population ratio were unchanged at 61.6% and 58.0%, respectively. Average hourly
earnings increased by $0.10 to $30.40 in June after increasing $0.15 in May. Average hourly earnings
are up 3.6% from June 2020. The average work week dipped from 34.9 hours in May to 34.7 hours in
- The number of claims for unemployment insurance continue to fall gradually. According to the latest
weekly totals, as of July 17 there were 3,269,000 workers receiving unemployment insurance benefits,
down from the June 19 total of 3,484,000. The unemployment rate for the week ended July 17 was
2.4%, unchanged from a month earlier. During the week ended July 10, Extended Benefits were
available in 12 states; 47 states and territories reported 5,246,162 continued weekly claims for
Pandemic Unemployment Assistance benefits (5,950,167 in June), and 46 states and territories reported
4,233,883 continued claims for Pandemic Emergency Unemployment Compensation benefits
(5,273,180 in June).
- FOMC/interest rates: Following its meeting in July, the Federal Open Market Committee decided to
keep the target range for the federal funds rate at 0.00%-0.25% and expects to maintain this target
range until labor market conditions have reached levels consistent with the Committee's assessments of
maximum employment, and inflation has risen to 2% and is on track to moderately exceed 2% for some
time. The FOMC also decided to continue to increase its holdings of Treasury securities by at least $80
billion per month and of agency mortgage-backed securities by at least $40 billion per month.
- GDP/budget: According to the advance estimate, the economy accelerated at an annual rate of 6.5% in
the second quarter of 2021 after advancing 6.3% in the first quarter of 2021. Consumer spending, as
measured by personal consumption expenditures, increased 11.8% in the second quarter after rising
11.4% in the prior quarter. In the second quarter, nonresidential (business) fixed investment climbed
8.0% following a 12.9% increase in the first quarter; residential fixed investment fell 9.8% after
increasing 13.3% in the first quarter. Exports rose 6.0% in the second quarter after decreasing 2.9% in
the first quarter, and imports (which are a negative in the calculation of GDP) increased 7.8% in the
second quarter (9.3% in the first quarter). The personal consumption expenditures price index (cost of
consumer goods and services) increased 6.4% in the second quarter, compared with a 3.8% rise in the
- The Treasury budget deficit was $174.2 billion in June, following the May deficit of $132.0 billion. The
deficit is nearly 80.0% smaller than the pandemic-inflated deficit of June 2020. Following the latest
increase, the budget deficit through the first nine months of the current fiscal year widened to $2.24
trillion, 18.0% lower than last year's deficit over the same period. Compared to last fiscal year,
government expenditures have declined 6.0%, while receipts have increased 35.0%.
- Inflation/consumer spending: Inflationary pressures continued to advance in June. According to the
latest Personal Income and Outlays report, consumer prices edged up 0.5% in June, the same increase
as May. Prices have increased 4.0% since June 2020. Excluding food and energy, consumer prices
rose 0.4% in June (0.5% in May) and 3.5% since June 2020. Personal income increased 0.1% in June
after falling 2.2% in May. Compensation of employees rose 0.7% in June, with wages and salaries
increasing 0.8%. Disposable personal income was essentially unchanged in June from May. Consumer
spending rose 1.0% in June following a 0.1% dip in May.
- The Consumer Price Index climbed 0.9% in June — the largest one-month increase since June 2008.
Over the 12 months ended in June, the CPI rose 5.4% — the largest 12-month increase since a 5.4%
increase for the period ended in August 2008. A 10.5% rise in prices for cars and trucks accounted for
more than one-third of the overall June price increase. Food prices increased 0.8% and energy prices
rose 1.5%, with gasoline prices climbing 2.5%. Core prices, excluding food and energy, climbed 0.9% in
June and have advanced 4.5% over the last 12 months — the largest 12-month increase since the period
ended in November 1991. Over the last 12 months, energy prices have risen 24.5% and food prices
have increased 2.4%.
- Prices that producers receive for goods and services continued to climb in June, increasing 1.0% after
advancing 0.8% in May. Producer prices increased 7.3% for the 12 months ended in June, the largest
yearly gain since November 2010 when 12-month data was first calculated. In June, prices for services
rose 0.8% and prices for goods moved up 1.2%. Producer prices less foods, energy, and trade services
advanced 0.5% in June and have risen 5.5% since June 2020, the largest 12-month increase since
- Housing: Over the past several months, residential sales have slowed. In June, sales of existing homes
increased for the first time in the last five months, climbing 1.4% after decreasing 0.9% in May. Over the
past 12 months, existing home sales increased 22.9%. The median existing-home price was $363,300
in June ($350,300 in May), up 23.4% from May 2020. Unsold inventory of existing homes represented a
3.3-month supply in June, higher than the 2.5-month supply in May. Sales of existing single-family
homes rose 1.4% in June following a 1.0% drop in May. Year over year, sales of existing single-family
homes rose 19.3%. The median existing single-family home price was $370,600 in June, up from
$356,600 in May.
- New single-family home sales declined in June for the third consecutive month. New home sales fell
6.6% in June after falling 5.9% in May. Sales of new single-family homes have decreased 19.4% from
June 2020. The median sales price of new single-family houses sold in June was $361,800 ($374,400 in
May). The June average sales price was $428,700 ($430,600 in May). The inventory of new
single-family homes for sale in June represents a supply of 6.3 months at the current sales pace, up
from the May estimate of 5.5 months.
- Manufacturing: Industrial production increased 0.4% in June after advancing 0.7% the previous month.
Manufacturing output edged down 0.1% in June following a 0.9% increase in May. In June, mining
increased 1.4% (1.2% in May) and utilities rose 2.7% (0.2% in May). Total industrial production in June
was 9.8% higher than its year-earlier level, but it was 1.2% below its pre-pandemic (February 2020)
- New orders for durable goods increased 0.8% in June after climbing 3.2% in May. Transportation
equipment, up for two consecutive months, led the increase, climbing 2.1% in June. Excluding
transportation, new orders increased 0.3% in June. Excluding defense, new orders rose 1.0%. New
orders for capital goods advanced 2.6% in June following a 6.9% increase in May. New orders for
nondefense capital goods increased 3.1% in June, while new orders for defense capital goods fell 1.5%.
- Imports and exports: Both import and export prices rose in June for the seventh consecutive month.
Import prices climbed 1.0% following a 1.4% advance in May. Import prices rose 11.2% over the 12
months ended in June. Import fuel prices increased 4.7% in June following a 4.0% jump in May. Import
fuel prices advanced 85.1% for the year ended in June. Nonfuel import prices climbed 0.7% in June
following a 0.9% advance in May. Export prices increased 1.2% in June after climbing 2.2% in May. For
the year ended in June, the price index for exports rose 16.8%. Agricultural export prices increased
1.5% in June following a 6.1% advance in May. Nonagricultural exports rose 1.1% in June after
increasing 1.7% in May.
- The international trade in goods deficit was $91.2 billion in June, up $3.0 billion, or 3.5%, from May.
Exports increased $0.5 billion, or 0.3%, while imports rose $3.5 billion, or 1.5%. For the 12 months
ended in June, exports have risen 40.6%, while imports have increased 35.5%.
- The latest information on international trade in goods and services, out July 2, is for May and shows that
the goods and services trade deficit increased by 3.1% to $71.2 billion. May exports rose 0.6%, while
imports increased 1.3%. Year over year, the goods and services deficit increased $110.9 billion, or
45.8%, from May 2020. Exports increased $101.6 billion, or 11.4%. Imports increased $212.5 billion, or
- International markets: While inflation continues to heat up in the United States, other parts of the world
are not seeing that trend. Japanese consumer prices continue to hover near zero, and the Bank of
Japan does not expect its 2.0% target to be met in the next few years. On the other hand, other parts of
the world are seeing mounting inflationary pressures. The Producer Price Index in Germany rose in
June, pushing the annual inflation rate to 8.5%. The German Consumer Price Index is up 3.8% since
June 2020. Overall, global markets were mixed in June. Solid earnings data and continuing quantitative
easing helped lift investor confidence in some areas, which was tempered by the spread of covid virus
strains. For June, the STOXX Europe 600 Index gained about 0.9%; the United Kingdom's FTSE dipped
0.3%; Japan's Nikkei 225 Index fell 5.2%; and China's Shanghai Composite Index declined nearly 3.5%.
- Consumer confidence: According to the latest report from the Conference Board, consumer
confidence was relatively unchanged in July. The Consumer Confidence Index® stands at 129.1, up
marginally from 128.9 in June. The Present Situation Index, based on consumers' assessment of current
business and labor market conditions, rose from 159.6 in June to 160.3 in July. The Expectations Index,
based on consumers' short-term outlook for income, business, and labor market conditions, was virtually
unchanged at 108.4 in July compared to 108.5 in June. According to the report, consumer confidence
was flat in July but remains at its highest level since the onset of the pandemic in February 2020.
Eye on the Month Ahead
While the summer began with an easing of pandemic-related restrictions, which helped spur economic
growth, the rapid spread of the coronavirus, particularly the Delta strain, raises the possibility of reinstituting
some of those same restrictions in August. Job growth and industrial production, which had been steadily
improving, may be stunted as we move into the later part of the summer and into the fall.
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
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