What We Are Watching This Week
- US Leading Indicators
- S&P Flash US Services and Manufacturing PMI
- Existing and New Home Sales
Highlights From Last Week
- Producer Price Index
- Consumer Price Index
- US Retail sales
- Housing Starts and permits
Stocks had an intense week, driven by positive inflation and economic growth news, raising hopes for a “soft landing” for the economy. The Nasdaq Composite led with a 12.24% increase from its August 5 lows, fueled by an 18.93% rise in NVIDIA shares. Growth stocks outperformed value stocks.
Stocks in Toronto ended the week on a strong note, continuing their upward momentum from earlier in the week. The TSX Composite Index rose 21.89 points on Friday, closing at 23,054.61. For the week, the index gained 743 points, or 3.33%. The Canadian dollar appreciated by 0.27 cents, reaching 73.08 cents in the U.S. Meanwhile, Statistics Canada reported a 2.1% decline in sales in June, driven by reduced sales in transportation equipment, chemicals, and primary metals. However, housing starts surged to 279,000 in July, up from 241,000 in June.
The pan-European STOXX Europe 600 Index rose 2.46% amid expectations for potential interest rate cuts. Major European indexes also saw gains: Germany’s DAX was up 3.38%, France’s CAC 40 was up 2.48%, Italy’s FTSE MIB was up 4.09%, and the U.K.’s FTSE 100 was up 1.75%.
In July, a crucial gauge of wholesale inflation increased less than anticipated, potentially paving the way for the Federal Reserve to consider reducing interest rates. According to the Labor Department’s Bureau of Labor Statistics, the producer price index (PPI), which tracks the selling prices producers receive for goods and services, rose by 0.1% for the month. Excluding the often-volatile food and energy sectors, the core PPI remained unchanged. Economists surveyed by Dow Jones had forecasted a 0.2% rise in the headline and core PPI. A more specific core measure, excluding trade services, showed a 0.3% increase. The headline PPI advanced by 2.2% year-over-year, marking a notable decrease from the 2.7% increase reported in June. Despite a remarkable 0.6% increase in final demand goods prices—the largest rise since February—driven mainly by a 1.9% surge in energy prices, including a 2.8% jump in gasoline, wholesale inflation remained relatively subdued. This was partly offset by a 0.2% decline in services prices, the largest decrease since March 2023. Specifically, trade service prices fell by 1.3%, and margins for wholesaling machinery and vehicles dropped by 4.1%. However, a 2.3% increase in portfolio management helped mitigate some of the decline in services prices.1
The Consumer Price Index for All Urban Consumers (CPI-U) increased by 0.2 percent on a seasonally adjusted basis in July, following a 0.1 percent decline in June, according to the U.S. Bureau of Labor Statistics. Over the past year, the all-items index rose 2.9 percent before seasonal adjustment, the smallest increase since March 2021. Nearly ninety percent of the rise in the all-items index was attributed to a 0.4 percent increase in shelter costs. The energy index remained steady after declining in the previous two months, while food increased by 0.2 percent in July following a 0.2 percent increase in June. The all items index less energy and food rose 0.2 percent following a 0.1% increase in June. For the 12 months ending July, the all items index less food and energy index rose 3.2% and was the smallest 12-month increase since April 2021. 2
On Thursday, the U.S. Department of Labor reported for the week ending August 10, seasonally adjusted initial claims for unemployment were 227,000, a decrease of 7,000 from the previous week’s revised figure of 234,000. The 4-week moving average was 236,500, down by 4500 from last week’s revised average. The total number of continued weeks claimed for benefits in all programs for the week ending July 27 was 1,932,117, a decrease of 28,380 from the previous week. In the comparable week in 2023, 1,834,506 claims were filed for benefits.3
With inflation pressures showing signs of easing, many analysts estimated consumer spending to increase by 30 basis points in July. On Thursday, the U.S. Commerce Department reported that the advanced retail sales accelerated by 1% in the month, adjusted for seasonality but not for inflation. This is the most robust monthly increase since April of 2022. Total sales for May through July 2024 increased 2.4% from last year. Retail sales have gained 2.7% yearly, the highest reading since April. June sales were revised lower by 0.2% after initially being reported as flat. Sales excluding auto sales rose by .4%, higher than the 0.1% estimate.4
Also, on Thursday, the Federal Reserve reported that industrial production fell 0.6% in July, following an increase of 0.3% in June. A shutdown during the month in the petrochemical and related industries due to Hurricane Beryl was estimated to have impacted industrial production growth by 0.3 percent. In addition, the index for motor vehicles and parts fell by nearly 8% in the month. Excluding motor vehicles and parts, manufacturing rose 0.3%. The mining index held steady, while the index for utilities decreased by 3.7%. Capacity utilization slipped to 77.8% in July, below the long-run average (1972-2023) By 1.9%.5
Consumer sentiment remained stable for the fourth month, rising slightly by 1.4 index points. Sentiment shifted notably with election news: Democrats saw a 6% increase in optimism after Harris replaced Biden as the nominee, while Republicans’ sentiment dropped by 5%. Independents’ sentiment rose by 3%. Currently, 41% of consumers prefer Harris over Trump for economic management, compared to Trump’s previous 5-point advantage over Biden. Overall, expectations for personal finances and the five-year economic outlook improved, reflecting the impact of election developments. Inflation expectations remained steady at 2.9% for the short term and 3.0% for the long term, higher than pre-pandemic levels.6
U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced that the building permits for privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,396,000. This represents a 4.0% decrease from the revised June rate of 1,454,000 and a 7.0% drop from the July 2023 rate of 1,501,000. Single-family authorizations were at 938,000, slightly down by 0.1% from June’s revised figure of 939,000. Permits for buildings with five or more units were at a rate of 408,000. Housing starts for July were at a seasonally adjusted annual rate of 1,238,000, 6.8% below the revised June rate of 1,329,000 and 16.0% lower than the July 2023 rate of 1,473,000. Single-family starts fell to 851,000, down 14.1% from June’s revised rate of 991,000. The rate for units in buildings with five or more units was 363,000. In July, housing completions were at a seasonally adjusted annual rate of 1,529,000. This is 9.8% below the revised June estimate of 1,696,000 but 13.8% above the July 2023 rate of 1,343,000. Single-family completions were at 1,054,000, slightly up by 0.5% from June’s revised rate of 1,049,000. Completions for buildings with five or more units totaled 473,000.7
| WK | Year to Date | |
| Dow | 2.94% | 7.88% |
| S&P500 | 3.93% | 16.45% |
| Nasdaq | 5.29% | 17.46% |
| S&P400 Mid-cap | 2.58% | 8.26% |
| Russell | 2.93% | 5.67% |
| TSX | 3.30% | 10.00% |
| Oil | -1.50% | 5.60% |
- https://www.bls.gov/news.release/ppi.nr0.htm
- https://www.bls.gov/news.release/cpi.nr0.htm
- https://www.dol.gov/ui/data.pdf
- https://www.census.gov/retail/marts/www/marts_current.pdf
- https://www.federalreserve.gov/releases/g17/current/
- http://www.sca.isr.umich.edu/
- https://www.census.gov/construction/nrc/pdf/newresconst.pdf
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.