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Markets had a solid upward week.
The S&P roller coaster last week: Up, up, up, up a little, and up.
Durable goods orders: They were expected to go up +5%, but the actual number was up +11%. Motor vehicle orders were up +35% in July.
Fed: August normally brings us the Jackson Hole meeting hosted by the Kanas City Fed. This year, no surprise, it was a virtual meeting. The key presentation comes from the Fed Chair. During his remarks Jay Powell discussed how the Fed will view inflation moving forward. We all know their target number for inflation is +2.0%. That hasn’t changed. But moving forward it is a +2.0% average. The metric the Fed watches is the PCE (which gets updated today) where the last read was only +0.5%. The Fed will allow inflation to go above their target number as long as the average is around +2.0%. Reading between the lines that tells me inflation will likely head above +2% in the near future. Don’t be surprised if the Fed allows it to go above +3.0% for a while, because “the average” could still be around the target range. The Fed Chair didn’t discuss what that timeframe range might be yet.
GDP: The second read came in at -31.7%, slightly better than the first read. There's still one more read of Q2 to come, but the focus is now on the first read for Q3. The economists at First Trust are looking for a rebound number of something like +20%.
Housing: New home sales were up +14% in July and are up +36% YOY.
Jobless claims: Claims came in at 1 million for the prior week. That’s the 21/22 weeks where claims have been over 1 million.
RNC: We heard the case for why Donald Trump should be re-elected. Lots of rhetoric against Joe Biden; no surprise there. Trump’s accomplishments were recounted. A few thoughts were detailed regarding a second term during his acceptance speech. But the focus will now turn to the first Presidential debate to be held here in Cleveland on September 29th.
Focus of the week: It will come on Friday when we get the new jobs and unemployment numbers. Expectations are for 1.4 million jobs. The unemployment number is expected to drop from 10.2% down to 9.9%.
Right before the bell there will be a change to the Dow 30 mix. Exxon Mobil, Pfizer, and Raytheon will be removed from the index. Normally you have similar companies replace similar companies. That’s true for Pfizer being replaced by Amgen. The same for Honeywell replacing Raytheon. But Exxon is being replaced by Salesforce, a software company. The Dow will now have the following tech representation: Apple, Cisco, IBM, Intel, Microsoft, and Salesforce. In the 135-year history of the Dow, this is the 55th change to the index.
Indicator focus: ISM manufacturing index (Tue); factory orders, motor vehicle sales (Wed); the ISM services index, jobless claims (Thu); and the jobs and unemployment numbers.