There was a major milestone this week as the S&P 500 Index briefly crossed the 3000 mark. The positive returns come on the heels of investors expecting the Federal Reserve to cut rates. Fed Chair, Jerome Powell, indicated in his Capitol Hill testimony on Wednesday the Fed was ready to cut rates as appropriate to sustain the expansion. Trade tensions were highlighted as a reason for the somber economic outlook for the U.S. economy. The S&P 500 Index is up over 20% year-to-date.

Second quarter earnings have begun trickling in with a little under 5% of companies reporting. Sales and earnings are currently slightly better than expected. Again, these are initial results and will likely change as more companies report earnings. The current expectations are for sales growth to slow relative to first quarter growth and for earnings to contract in the second quarter.

Wages are growing, but not by as much as expected. The prediction has always been tight labor markets will lead to accelerated wage growth. That hasn’t necessarily been the case. We are seeing wage growth, but the pace has been pretty slow, especially with the latest unemployment number still showing a strong jobs economy. June unemployment came in at 3.7% with yearly hourly earnings growth of 3.1%. The expectation for June was for an unemployment rate of 3.6% and earnings growth of 3.2%. The slow earnings growth may be indicative of labor market slack. Underemployed workers may still be moving into full-time positions.

We saw strength in nonfarm payrolls in June. The number for June was 224,000. This is much better than the expected 160,000 and the previous month’s 72,000. Professional/business services and healthcare led growth in payrolls over the period.

Consumers took on more debt in May than expected. Consumer credit for the month was at $17.1 billion. This is higher than the expected $16 billion but lower than the previous month’s $17.5 billion. This is annual growth of 5%. This growth in consumer credit was led by an increase in revolving credit of 8.2%.

There was an increase in oil prices this week with the price of WTI Crude rising by 5%. The increase has been attributed to the potential for supply disruptions caused by Tropical Storm Barry in the Gulf of Mexico and Iranian Persian Gulf issues.

Contributed by | Kuuku Saah, CFA, Investment Analyst

Kuuku is an Investment Analyst with seven years experience in the Wealth Management division of Bankers Trust, most recently on the Trading Desk as a Securities/Trading Specialist. Kuuku’s primary responsibilities include supporting our portfolio managers in security and portfolio analysis. Kuuku attended Drake University and double-majored in finance and economics. During that time he interned with BTC Capital Management.

Source: BTC Capital Management, Bloomberg LP, Ibbotson Associates.
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