What We Are Watching This Week 

  • Consumer Credit 
  • Consumer Price Index 
  • Producer Price Index 

Highlights From Last Week 

  • ISM Manufacturing and ISM Services 
  • ADP Employment Report  
  • US Employment  

The S&P 500 Index reached record highs, though the market’s gains were notably narrow. According to Russell 1000 indexes, growth shares outperformed value stocks by 415 basis points (4.15 percentage points), while small- and mid-cap benchmarks posted losses. The tech-heavy Nasdaq Composite ended the week 73.71% above its lows since the market began rebounding in mid- to late-2022. In contrast, the more value-oriented Dow Jones Industrial Average gained 32.79%, less than half that amount. Markets were closed Thursday for the Independence Day holiday, and traders observed lighter trading volumes as the week progressed. 

In a shortened week, Canada’s TSX Composite Index fell 184.99 points to 22,059.03 on Friday but gained 504 points for the week. Profit-taking hit energy and industrial sectors hard following disappointing employment news. However, gold, materials, and healthcare saw gains this week. The Canadian dollar decreased slightly to 73.34 cents in the U.S. Economically, Canada lost 1,400 jobs in June, raising the unemployment rate to 6.4%. The IVEY PMI jumped to 62.5 in June from 52.0 in May, indicating increased activity. 

The pan-European STOXX Europe 600 Index rose 1.01% in terms of local currency. Political tensions eased as France’s far-right failed to secure an outright majority in the first round of legislative elections on June 30. In the U.K., the Labour Party won the general election on July 4 with a significant majority, ending 14 years of Conservative rule, and Rachel Reeves became the first female Chancellor of the Exchequer. Major stock indexes also increased: France’s CAC 40 climbed 2.62%, Germany’s DAX gained 1.32%, Italy’s FTSE MIB rose 2.51%, and the U.K.’s FTSE 100 added 0.49%. Political uncertainty was highlighted by Marine Le Pen’s National Rally leading in the first round of the French parliamentary elections, ahead of President Macron’s Ensemble, which came in third. 

In June, as the Institute for Supply Management (ISM) reported on Monday, the Manufacturing PMI recorded 48.5 percent, a slight decrease from May’s 48.7 percent, indicating continued contraction in manufacturing activity. The New Orders Index improved but remained in contraction at 49.3 percent, while the Production Index fell to 48.5 percent. The Prices Index dropped to 52.1 percent, showing easing price increases. The Backlog of Orders Index and Employment Index both declined, signaling weaker demand and reduced production. Supplier Deliveries Index indicated faster deliveries, and the Inventories Index decreased further, reflecting ongoing inventory reduction. New Export Orders and Imports Indexes both fell into contraction territory. U.S. manufacturing contracted due to weak demand, reduced output, and accommodating input conditions. Companies showed reluctance to invest, affecting production and profitability. The share of manufacturing GDP in contraction rose, with a significant portion indicating overall manufacturing weakness. Only eight industries reported growth, while nine experienced contractions in June.1 

According to the U.S. Bureau of Labor Statistics, the number of job openings remained relatively unchanged at 8.1 million on the last business day of May. Throughout the month, hires and total separations were also stable at 5.8 million and 5.4 million, respectively. Among separations, quits were at 3.5 million, and layoffs and discharges were at 1.7 million, showing slight variation. This report estimates the number and rate of job openings, hires, and separations across the total nonfarm sector, categorized by industry and establishment size.2 

U.S. private payrolls increased by 150,000 jobs in June, slightly below expectations and indicating a slowdown in labor market momentum. The ADP Employment report revised May’s job growth to 157,000, up from the previously reported 152,000. Economists had forecast a June increase of 160,000 jobs. The report, developed with the Stanford Digital Economy Lab, precedes the Labor Department’s Bureau of Labor Statistics’ comprehensive June employment report. Initial ADP estimates have generally understated private payroll growth this year. Economists expect the BLS report to show 160,000 new private-sector jobs for June, down from May’s 229,000. Total payrolls are estimated to have risen by 190,000 jobs, compared to 272,000 in May, with the unemployment rate forecasted to remain at 4.0%.3 

In the week ending June 29, seasonally adjusted initial claims for U.S. unemployment rose to 238,000, up by 4,000 from the previous week’s revised figure of 234,000. The 4-week moving average also increased to 238,500, up by 2,250 from the prior week’s revised average of 236,250. For the week ending June 15, the total number of continued weeks claimed for benefits across all programs reached 1,772,043, an increase of 20,932 from the previous week. In the same week last year, there were 1,699,574 claims filed.4 

In June, the ISM Services PMI fell to 48.8 percent, down five percentage points from May’s 53.8 percent, marking its second contraction in three months. The Business Activity Index dropped to 49.6 percent, the first contraction since May 2020. The New Orders Index also contracted at 47.3 percent, a decrease from May’s 54.1 percent. The Employment Index continued its contraction for the sixth time in seven months, registering 46.1 percent. The Supplier Deliveries Index indicated slower deliveries at 52.2 percent. Prices Index eased slightly to 56.3 percent, and the Inventories Index decreased sharply to 42.9 percent. The Inventory Sentiment Index increased to 64.1 percent, and the Backlog of Orders Index contracted to 44 percent. Despite these contractions, the sector had experienced 15 consecutive months of growth before April. Respondents reported flat or lower business activity and transportation challenges affecting supplier deliveries. Overall, slower business activity, new orders, and continued employment contraction contributed to the decline.1 

U.S. job growth slowed steadily in June, with the unemployment rate rising to 4.1%, improving the chances that the Federal Reserve can manage inflation without causing a recession. Nonfarm payrolls increased by 206,000 jobs in June, according to the Labor Department’s Bureau of Labor Statistics. May’s data was revised down significantly to 218,000 jobs from the previously reported 272,000. Average hourly earnings rose by 0.3% in June after a 0.4% increase in May. Over the past 12 months, wages grew by 3.9%, the smallest gain since June 2021, following a 4.1% rise in May. Wage growth in the 3%-3.5% range is consistent with the Fed’s 2% inflation target. The unemployment rate increased to 4.1% from 4.0% in May. Combined with the moderation in May’s prices, this report confirmed that the disinflationary trend is back on track. This could boost Fed policymakers’ confidence in the inflation outlook and bring the U.S. central bank closer to considering rate cuts later this year.5 

WK Year to Date 
Dow 0.66% 4.47% 
S&P500 1.95% 16.72% 
Nasdaq 2.93% 22.26% 
S&P400 Mid-cap -1.17% 4.11% 
Russell -1.02% -0.02% 
TSX 0.80% 5.30% 
Oil  1.90% 16.00% 

Important Information:

Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.

Sightline Wealth Management LP (“Sightline”) is an investment dealer and is a member of the Canadian Industry Regulation Organization (CIRO) and the Canadian Investor Protection Fund (CIPF).

Sightline provides management and investment advisory services to high-net-worth individuals and institutional investors. Sightline Wealth Management LP is a wholly owned subsidiary of Ninepoint Financial Group Inc. (“NFG Inc.”). NFG Inc. is also the parent company of Ninepoint Partners LP, it is an investment fund manager and advisor and exempt market dealer. By virtue of the same parent company, Sightline is affiliated with Ninepoint Partners LP. Information and/or materials contained herein is for information purposes only and does not constitute an offer to sell or solicitation to purchase securities of any issuer or any portfolio managed by Sightline Wealth Management or Ninepoint Partners, including Ninepoint managed funds.

The opinions and information contained in this article are those of Sightline Wealth Management (“Sightline”) as of the date of this article and are subject to change without notice. Sightline endeavours to ensure that the content has been compiled from sources that we believe to be reliable. The information is not meant to be used as the primary basis of investment decisions and should not be constructed as advice. Each investor should obtain independent advice before making any investment decisions.

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