July 3 data rush part two: Services PMI, trade balance, et al
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Tech leads S&P 500 sector gainers; healthcare weakest group
Euro STOXX 600 index up ~0.8%
Dollar down; crude slips; bitcoin down >2%; gold gains >1%
U.S. 10-Year Treasury yield slides to ~4.35%
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JULY 3 DATA RUSH PART TWO: SERVICES PMI, TRADE BALANCE, ET AL
The economic indicators just kept coming on Wednesday, like fireworks at an Independence Day display.
Here are the remaining (non-labor-related) data, much of which, however, amounted to fizzles and duds.
The U.S. services sector dipped into contraction in June for the first time since April and for only the second time in a year-and-a-half.
The Institute for Supply Management's (ISM) non-manufacturing purchasing managers' index (PMI) USNPMI=ECI dropped five points to 48.8, a much steeper decline than the 1.3-point drop analysts anticipated.
A PMI print north of 50 indicates monthly expansion. Below that level signifies contraction.
Looking under the hood, production plummeted to 49.6 from 61.2, the new orders index slipped below 50, employment worsened and inventories tanked.
"The decrease in the composite index in June is a result of notably lower business activity, a contraction in new orders for the second time since May 2020 and continued contraction in employment," writes Steve Miller, chair of ISM's Services Business Survey Committee. "Survey respondents report that in general, business is flat or lower, and although inflation is easing, some commodities have significantly higher costs."
The report stands in stark contrast with S&P Global's competing services PMI USMPSF=ECI, which landed at a slightly improved 54.8.
The two PMIs differ in the amount of weight they allot to their various subcomponents (new orders, employment, etc).
Next, the gap between the value of goods and services imported to the United States and those exported abroad USTBAL=ECI widened by 0.8% in May to $75.1 billion.
Below the surface, exports decreased by 0.7%, reversing April's 0.7% gain. Exports edged 0.3% lower on the heels of the previous month's 2.3% surge.
Net exports was a GDP detractor in the first quarter, subtracting 65 basis points from the headline number.
"Though imports have grown on balance so far this year, exports have struggled amid a strong dollar and weak global demand, both of which will take time to abate," says Matthew Martin, U.S. economist at Oxford Economics.
While the closely watched goods trade deficit with China increased by 19.2% to $23.98 billion, the U.S. continued to import more from Mexico than China.
The value of goods imported from our neighbor south of the border has surpassed that of Chinese goods for all but one of the last 16 months.
Turning to the housing market, mortgage rates peeked back above 7% last week and would-be borrowers aren't having it.
The average 30-year fixed contract rate USMG=ECI rose 10 basis points to 7.03%, according to the Mortgage Bankers Association (MBA).
And just like that, applications to purchase homes USMGPI=ECI and refinance existing mortgages USMGR=ECI fell by 3.3% and 1.5%, respectively.
"Mortgage rates moved higher last week, crossing the 7 percent mark, even as the latest inflation data has kept market expectations alive for a rate cut from the Fed later this year,” writes Mike Fratantoni, MBA’s chief economist.
The 30-year fixed rate is 18 basis points hotter than the same week last year, while applications for loans to buy homes - considered among the more leading housing indicators - is down an even 12% over the last 12 months.
Finally, new orders for U.S. Factory-made merchandise USFORD=ECI unexpectedly dropped by 0.5% in May, reversing April's downwardly revised 0.4% gain and defying the 0.2% gain analysts expected.
(Stephen Culp)
*****
FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:
PRE-JULY 4 DATA RUSH, PART ONE: JOBS - CLICK HERE
BOFA CLIENTS KEEP THE FAITH IN TECH, COMMUNICATION SERVICES - CLICK HERE
S&P 500 INDEX VS RESISTANCE LINE: ACTING LIKE IVY - CLICK HERE
KICKING THE CAN DOWN THE ROAD - CLICK HERE
TOUGH TIMES ARE NOT OVER FOR EUROPEAN AUTOS - CITI - CLICK HERE
HAVEN BRITAIN? CLICK HERE
A CLOSER LOOK AT U.S. DRUG PRICING RISKS - CLICK HERE
THE GRASS IS GREENER TODAY IN EUROPE - CLICK HERE
SUNNY START IN EUROPE - CLICK HERE
POWELL SPARKS OPTIMISM ON RATE CUTS - CLICK HERE
ISM services PMI https://reut.rs/4cPY9Xv
Trade balance https://reut.rs/467h9Pb
Imports from China and Mexico https://reut.rs/4csTsTw
Factory orders and ISM PMI https://reut.rs/3VQ6tj9
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