Dow sllid back 3, decliners over advancers 3-1 & NAZ was off 60. The MLP index retreated 3+ to the 237s & the REIT index was off 1+ to the 378s. Junk bond funds were mixed & Treasuries saw more selling, raising yields. Oil was fractionally lower to 81 (following recent strength) & gold sank 26 to 1982.
AMJ (Alerian MLP Index tracking fund)
Job vacancies & layoffs edged lower in Jun, according to a Labor Dept that points to a stable labor market. Employment openings totaled 9.58M for the month, edging lower from the downwardly revised 9.62M in May, the dept said in its monthly Job Openings & Labor Turnover Survey (JOLTS). That was the lowest level of openings since Apr 2021 & below the 9.7M estimate. Along with that, the JOLTS report said layoffs nudged down to 1.53M, after totaling 1.55M in May. Economists were watching the 2 data points closely for clues about the direction of a labor market that has proven surprisingly resilient despite a series of Federal Reserve interest rate hikes aimed at slowing the economy & inflation. Declines in both job openings & layoffs indicate that demand for labor is slowing, as the Fed hopes, while companies are still retaining workers, indicating that the unemployment rate is unlikely to spike anytime soon. The JOLTS report is a key indicator for the Fed, as it ponders what to do next after having raised interest rates a total of 5.25 percentage points since Mar 2022. The Jun total for job openings represents a decline of nearly 1.4M, or 12.6%, from the same period a year ago. There are now about 1.6 job openings per every available worker. Along with the drop in openings & layoffs came a decline in hiring to 5.9M, a drop of 0.2 percentage point as a share of total employment. Quits also fell noticeably, falling by nearly 300K or 0.2 percentage point.
Job openings, layoffs declined in June in a positive sign for the labor market
Lending conditions at US banks are tight & likely to get tighter, according to a Federal Reserve survey. The Fed's closely watched Senior Loan Officer Opinion Survey showed that while credit conditions got more strict, demand declined as well. Those results are important as economists who expect a recession believe that the most likely source will be from the banking system, which has had to respond to a series of 11 interest rate hikes as well as a momentary crisis in Mar when 3 midsize institutions failed. “Regarding banks’ outlook for the second half of 2023, banks reported expecting to further tighten standards on all loan categories,” the Fed said in a survey summary. “Banks most frequently cited a less favorable or more uncertain economic outlook and expected deterioration in collateral values and the credit quality of loans as reasons for expecting to tighten lending standards further over the remainder of 2023.” On the issue of consumer lending, banks “reported having tightened standards for credit card loans and other consumer loans, while a moderate net share reported having done so for auto loans.” Banks also said they are raising the minimum level for credit scores when giving personal loans & are lowering credit limits in the $1.9T consumer-loan space. In the critical $2.76T commercial & industrial lending segment, the survey noted that a “major” share of banks said they have seen lower demand for loans amid tightening standards across all business sizes. Commercial real estate also saw a large share of banks saying they have put more restrictions on standards along with weaker demand. Fed officials say they are aware of conditions in the banking sector, though they continue to raise interest rates to try to bring down inflation.
Banks say conditions for loans to businesses and consumers will keep getting tougher
US manufacturing appeared to stabilize at weaker levels in Jul amid a gradual improvement in new orders, but factory employment dropped to a 3-year low, suggesting that layoffs were accelerating. The Institute for Supply Management (ISM) said that its manufacturing PMI edged up to 46.4 last month from 46.0 in Jun, which was the lowest reading since May 2020. It was the 9th straight month that the PMI stayed below the 50 threshold, which indicates contraction in manufacturing, the longest such stretch since the 2007-2009 recession. The forecast called for the index to rise to 46.8. While the ISM survey continues to offer a grim assessment of manufacturing conditions, hard data suggest the sector is shuffling along. Data from the Federal Reserve last month showed factory production rebounded in Q2, ending 2 straight quarterly declines. The gov reported last week that business spending on equipment grew solidly in Q2 after slumping in the prior 2 qtrs. Manufacturing, which accounts for 11.1% of the economy, has been slammed by 525 basis points worth of interest rate increases from the Fed since Mar 2022. Spending on long-lasting manufactured goods has slowed after booming during the COVID-19 pandemic, with services like airline travel & visits to amusement parks now in favor.
As in the past, weaker earnings reports tend to lag the better ones. In addition, the effects of high interest rates on the economy are getting more attention.
Dow Jones Industriwweker earnings tend to als
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