Markets push higher with Dow reaching a new record

Dow advanced 278 for a new record, advancers over decliners 4-3 & NAZ climbed 80.  The MLP index stayed in the 179s & the REIT index was little changed in the 462s.  Junk bond funds inched higher & Treasuries were mostly flattish.  Oil dipped under 71 & gold was off 9 to 1813 (more on both below).

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Household debt rose by its highest $ amount in 14 years during Q2, thanks mostly to a surge in the housing market that brought the collective American IOU to just shy of $15T, the Federal Reserve reported.  Total debt balances jumped $313B in the Apr-Jun period, the sharpest rise since the same period in 2007.  As a share of debt, that represented a 2.1% increase, the fastest pace since 2013.  Most of the gain came from mortgage originations, both initial purchases & refinances, which have been on fire as the Federal Reserve has kept benchmark borrowing rates anchored around historic lows.  Mortgage balances increased $282B for the period, up 2.8% rise from Q1 & 6.7% from a year ago, for a total of $10.4T.  Over the past 4 qtrs, mortgage originations have totaled close to $4.6T, amounting to 44% of all outstanding home loan balances.  But the swelling debt numbers weren't just about mortgages, with non-housing balances up $44B.  Credit card balances increased by $17B, while auto loans were up $33B.  Student loan debt actually decreased for the period, falling $14B to $1.57T as forbearance programs have kept education-related balances in check.  Indeed, gov efforts overall at getting consumers through the Covid-19 pandemic resulted in low delinquency numbers across the board.  In the aggregate, some 2.7% of debt was in some form of delinquency, a 2-percentage point drop from Q4-2019, just before the pandemic hit.  However, those breaks are expiring in the coming months, posing challenges to borrowers who now will have to get current on their loans.

Household debt jumps by the most in 14 years to nearly $15 trillion

The Institute for Supply Management, a trade group of purchasing managers, said that its index of manufacturing activity declined by 1.1 percentage points to a reading of 59.5.  The index had also slowed in Jun, dropping to 60.6 from a reading of 61.in May.  Any reading above 50 indicates growth in the manufacturing sector.  Jul was the 14th consecutive month manufacturing has grown after contracting in Apr 2020 when the coronavirus triggered nationwide business shutdowns.  But the Jul reading showed slower growth in new orders & production.  Manufacturers have struggled in recent months with supply-chain bottlenecks that have made it difficult for them to get computer chips & other necessary components for their products.  “As we enter the third quarter, all segments of the manufacturing economy are impacted by near record-long raw-material lead times, continued shortages of critical basic materials, rising commodity prices and difficulties in transporting products” said Timothy Fiore, chair of the ISM manufacturing survey committee.  

US manufacturing expands again in July, but pace slows

Gold futures finished lower as equity markets tilted higher & Treasury yields & the $ edged up.  The decline in bullion prices was also attributed to some consolidation of profits by investors after a run above $1800 for the precious metal.  The decline for gold came as stocks took a leg higher, with the Dow gaining altitude, while the yield for the 10-year Treasury note was up slightly at around 1.18% & the $ was inching higher, up around 0.05%, measured by the ICE U.S. Dollar Index.  Against that backdrop, Dec gold closed $8 (0.4%) lower at $1814 an ounce, following a 0.3% gain to start the week & the first session in Aug.  Price action for the precious commodity may ultimately be dictated by the monthly US labor-market data due Fri which could help investors better gauge the economic recovery from the COVID pandemic against the backdrop of the spread of the highly transmissible delta variant.  Commodity investors continue to key in on comments from Federal Reserve members, with some policy makers offering a more hawkish stance on monetary policy since the conclusion of the Fed's rate-setting meeting last week.

Gold futures end lower Tuesday as yields, dollar perk up

Oil futures gave up early gains to finish lower, extending a sharp decline from the previous session blamed on worries about the impact on demand from the spread of the delta variant of the coronavirus that causes COVID-19.  West Texas Intermediate crude for Sep fell 70¢ (1%) to close at $70.56 a barrel.  Oct Brent crude, the global benchmark, declined 48¢ (0.7%) ending at $72.41 a barrel.  Both benchmarks fell more than 3% yesterday.  Investors will also be paying attention to weekly data on US crude & product inventories this week.  The forecast is for crude inventories to show a drop of 4M barrels last week.  Gasoline stocks are expected to show a drop of 1.1M barrels, while distillate supplies are seen down 600K barrels.

Oil ends lower, extends drop as COVID spread stokes demand worries

Investors were a little cautious in the first hour of returning.  But they returned & took the Dow over 35K to a new record.  The rise is difficult to understand with DC so dysfunctional & so much that is needed to get done.  Recently the Dow has been trending sideways.  During the last 3 weeks, the Dow has been up a relatively modest 120.  The bulls may be away on holiday.

Dow Jones Industrials