Weekly Economic Review | June 17, 2024 | Stephens

Who We Are

What We Do

We provide investment banking, research, sales and trading, asset and wealth management, public finance, insurance, private capital, and family office services.

About Us

We are a family-owned financial services firm that values client relationships, long-term stability, and supporting the communities where we live and work.

The Stephens Story

The idea of family defines our culture, because each of us knows that our reputation is on the line as if our own name was on the door.

Leadership

Our reputation as a leading independent financial services firm is built on the stability of our longstanding and highly experienced senior executives.

Impact Initiatives

We are committed to corporate philanthropy; economic and financial literacy advocacy; and diversity, equity, and inclusion initiatives.

Our Brand Ambassadors

Stephens is proud to sponsor the PGA TOUR, LPGA Tour, and PGA TOUR Champions careers, as well as applaud the philanthropic endeavors, of our Brand Ambassadors.

Stephens & Williams Racing Partnership

Stephens is the official investment banking partner of Williams Racing, one of the most winning teams in F1 history. We share that tradition of success.

Making Connections

We host many highly informative meetings each year with clients, industry decision makers, and thought leaders across the U.S. and in Europe.

Our Businesses

Capital Management

We provide fiduciary investment strategies to public-and private-sector institutional clients through asset allocation, consulting, and retirement services.

Fixed Income Sales & Trading

Decades of proven performance and experience in providing tailored fixed income trading and underwriting services to major municipal and corporate issuers.

Institutional Equities and Research

Proven industry-leading research, global market insights, and client-focused execution.

Insurance

Customized risk management, property & casualty, executive strategies and employee benefits solutions that protect our clients over the long term.

Investment Banking

We assist companies with accessing capital through innovative advisory and execution services that help firms achieve their strategic goals.

Private Capital

We have been a trusted and reliable source of capital for private companies for over 70 years.

Private Wealth Management

Our experienced Private Client Group professionals develop customized investment strategies to help clients achieve their financial goals.

Public Finance

We are a trusted municipal advisor with proven expertise in public financings. We also work with clients in negotiated and competitive municipal underwritings.

Market Trends

Weekly Economic Review | June 17, 2024

Jun 17, 2024

Economic Review

The Labor Department reported that initial jobless claims jumped to the highest level in nine months last week, led by a large increase in California. The increase could be related to the end of the school year or general seasonal volatility. California’s new law that mandates a $20 minimum wage for fast-food workers took effect in April. First time claims in regular state programs recorded 242,000 for the week ending June 8th after the prior week’s report of 229,000. The four-week moving average climbed to 227,000 from 222,250 the prior week. Continuing claims, which include people who have received unemployment benefits for a week or more, gained 30,000 to 1,820,000 for the week ending June 1st. The insured unemployment rate, the number of people currently receiving unemployment insurance as a percentage of the labor force, remained at 1.2%.

The National Federation of Independent Business reported sentiment among small businesses edged up in May to the highest level this year. Five of the 10 components that make up the sentiment gauge increased, led by improvement in the share of owners who expect the economy to improve. Firms’ plans to increase employment also improved. The index climbed to 90.5 in May from an 89.7 reading in April.

The Labor Department reported the consumer price index remained unchanged in May, the first month since the summer of 2022 without an increase in headline inflation. Many necessities such as groceries, gasoline and car insurance became cheaper. This report builds the case that inflation has resumed its downward path after an unanticipated surge in the first quarter. Consumer prices year-on-year change declined to 3.3% from last month’s 3.4%. Service prices, which make up 64% of the index, gained 0.2% in May after gaining 0.4% in April. Prices of commodity based manufactured goods fell 0.4% in May after climbing 0.2% the prior month. The core CPI, which excludes volatile food and energy prices, gained 0.2% in May after increasing 0.3% the prior month. The year-on-year change in core CPI is 3.4%, still much higher than the Fed’s target rate of 2.0%.

The FOMC met on Wednesday and held the targeted federal funds rate as expected to a range of 5.25% to 5.50% for the seventh straight meeting. The pace of balance sheet runoff was also unchanged at $25 billion per month for Treasuries and $35 billion per month for MBS. The policy statement was mostly unchanged, but the Fed modified the language to reflect a modest improvement in the intermeeting period. The SEP dot plot was more hawkish than expected, signaling only one rate cut in 2024, down from three in March. Chair Jerome Powell comments after the meeting essentially boiled down to a desire to maximize the potential for a soft landing.

The Treasury Department reported a budget deficit of $347.1 billion for the month of May with the government collecting $323.6 billion and spending $670.8 billion. This compares to a deficit of $240.3 billion a year earlier. The year-to-date deficit is $1,202 billion, which compares to a year-to-date deficit of $1,165 billion last year. May is the eighth month in the government’s fiscal year.

The Labor Department reported the producer price index unexpectedly declined in May by the most in seven months, another welcome development in the fight against inflation. Wholesale prices declined 0.2% in May after surging 0.5% in April. Year-on-year wholesale prices were up 2.2% in May after Aprils’ upwardly revised increase of 2.3%. Goods prices, which make up 30% of the weighting, fell 0.8% in May after climbing 0.4% in April. Services, which make up 67% of the index, remained unchanged after increasing 0.6% in April. The core PPI, which excludes volatile food and energy prices, remained unchanged in May, with a year-on-year gain of 2.3%. PPI ex food, energy and trade remained unchanged.

The Labor Department reported the import price index fell 0.4% in May after surging 0.9% the prior month. The loss was driven by a 2.0% drop in prices for industrial supplies and a decline of 1.7% in petroleum. Import prices are 1.1% higher year-on-year. Import prices ex petroleum fell 0.3% in May for a year-on-year gain of 0.4%.

The University of Michigan’s preliminary index of consumer sentiment declined for the third straight month in June. Consumers saw their personal finances deteriorate, even as consumers push back against price hikes. Inflation expectations remained at the highest levels since November for both the one-year and long-term indexes. Consumers’ living standards are deteriorating suggesting they may be running out of savings. The gauge of consumer confidence decreased to 65.6 in June from 69.1 in May. The index of current conditions dropped to 62.5 from 69.6 the prior month while the index of expectations declined to 67.6 from 68.8 the prior month. The reading for 5-10 year inflation expectations, an inflation indicator closely watched by the Fed, climbed to 3.1% in June from 3.0% in May. One-year inflation expectations remained unchanged at 3.3%.

The Mortgage Bankers Association reported the MBA index of mortgage applications surged last week as mortgage rates pulled back from two weeks of gains. The index rose 15.6% for the week ending June 7th after dropping 5.2% the prior week. Refinancing applications jumped 28.4% to 554.7 from 432.1 the prior week. Home purchase mortgage applications increased 8.6% to 1143.7. Refinancing made up 35.2% of applications with an average loan size of $271,100, while purchases average loan size at $428,700. The average contract rate on a 30-year fixed-rate mortgage declined to 7.02% from 7.07% the prior week.

BOND MARKET REVIEW

Rates plunged during the week on reports that inflation slowed during the month of May. Friday’s yields for the 2-, 5-, 10- & 30-year Treasury benchmarks securities closed at 4.70%, 4.24%, 4.22% and 4.35%. The 2yr/5yr, 5yr/10yr, 10yr/30yr and 2yr/30yr spreads closed at -46, -2, 13, and -35 basis points respectively.

Economic/Events Calendar

Monday

June 17

Jun Empire Manufacturing (-10.0)

7:30 Central

Tuesday

June 18

May Retail Sales (0.3%)

7:30 Central

May Retail Sales Ex Auto & Gas (0.4%)

7:30 Central

May Industrial Production (0.3%)

7:30 Central

May Capacity Utilization (78.6%)

7:30 Central

Apr Business Inventories (0.3%)

9:00 Central

Wednesday

June 19

Jun 14th MBA Mortgage Applications

6:00 Central

Jun NAHB Housing Market Index (46)

9:00 Central

Thursday

June 20

Jun 15th Initial Jobless Claims (235k)

7:30 Central

May Housing Starts (1,373k)

7:30 Central

May Building Permits (1,450k)

7:30 Central

1st Qtr Current Account Balance (-$206.8b)

7:30 Central

Friday

June 21

May Leading Economic Index (-0.3%)

9:00 Central

May Existing Home Sales (4.10m)

9:00 Central

About the Expert

Troy Clark

Senior Vice President, Fixed Income Strategist, Fixed Income Sales & Trading

Mr. Clark has been in investment banking since 1983. He is a Chartered Financial Analyst. He has been a fixed income strategist at Stephens Inc. since 1996, developing investment strategies, policies and procedures for institutions consistent with overall asset/liability management.

Read full bio
Source: Bloomberg L.P.
  1. This report has been prepared solely for informative purposes as of its stated date and is not a solicitation, or an offer, to buy or sell any security. All expressions of opinion reflect the judgment of the individual expressing the opinion and are subject to change. This report does not purport to be a complete description of the markets or developments referred to in the material. Information included in the report was obtained from internal and external sources which we consider reliable, but we have not independently verified such information and do not guarantee that it is accurate or complete. Prices, yields, and availability are subject to change with the market. There is no assurance any forward looking statements will be realized or any of the trends mentioned will continue. Nothing in this report is intended, or should be construed, as legal, accounting, regulatory or tax advice. Additional information available upon request. 2024 Stephens Inc., Member NYSE/SIPC.