Data loop-de-loop

Summer is theme park roller coaster season, and it makes perfect sense that financial markets would see it the same way. Perhaps it’s due to summer vacations or perhaps widespread fatigue, but markets were pushed and pulled by stronger, then weaker, economic data last week. Through it all, though, the S&P 500 hit another record high, while the 10-year Treasury yield treaded water.

June retail sales showed consumer resilience, with headline sales unchanged and May sales revised higher. Expectations had been that consumers were under pressure and would curtail their spending. Sales online and at eating and drinking establishments were notably strong. 

On the manufacturing side, June industrial production and capacity utilization both increased, above economist expectations. Also helping at the margin were declining mortgage rates, as the 30-year rate fell to its lowest level since mid-March.

A slight offset to this better news were higher weekly jobless claims, rising from 223,000 to 243,000. Claims followed a similar seasonal patten last summer before falling back, and there may have been some hurricane-related additional claims in this week’s report, so the labor market may not be weakening as much as feared.

In his speech last week, Federal Reserve Governor Waller said he is encouraged by the recent economic data and indicated that the time to lower the policy rate is drawing closer. Although he still needs to see additional data to confirm his view, he thinks a soft economic landing is more likely. More data will be released before the Fed’s next meeting on July 31.