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The AM Call: July Payrolls = More Evidence of a Soft Landing

  • The July monthly jobs report was the biggest macro data point last week. Nonfarm payrolls expanded by 187,000, slightly lower than the estimate for 200,000, and compared to 185,000 (revised) in June. The unemployment rate fell to 3.5%, better than the estimate and prior of 3.6%. However, average hourly earnings climbed a bit more than expected, up 4.4% YoY and up 0.4% MoM, both slightly worse than estimated. The July payroll data was seen by markets as indicating that chances of a soft landing continue to rise, as payrolls continue their gradual downshift.
  • The credit rating agency Fitch cut the U.S. sovereign rating by one notch from AAA to AA+, citing “expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.” U.S. Treasury yields rose as a result. The entire yield curve is back above 4%.
  • In Brazil, the central bank cut the SELIC rate by -50 bps to 13.25%. This was the central bank’s first rate cut since 2020, and indicates that the emerging markets economies continue to be ahead of the developed world in dealing with inflation. Real rates in Brazil are strongly positive, meaning that monetary policy remains relatively tight.
  • Equities: Stocks sold off last week as earnings season continued. Company earnings were mostly disappointing, as positive earnings surprises have been below historic averages despite soft expectations (expected EPS contraction for S&P 500 for 2Q23 below 7%). However, several companies posted stellar earnings beats, including Caterpillar (CAT), Humana (HUM), Booking (BKNG), Cloudfare (NET), DoorDash (DASH), Global Payments (GPN) and Amazon (AMZN). Amazon reported 11% Revenue growth, which beat estimates by 2%, while EPS came in twice as high as projected driven strong third-party online sales (+18% YoY) and ad revenue (+22% YoY). Stronger than expected Non-AWS Operating Profit (2.3Bi vs -287m), and a better-than-expected 3Q23 revenue guide, implying possible +12.5% top line growth, led shares higher. Earnings disappointments included Rockwell (ROK), Paycom (PAYC), Johnson Controls (JCI), Robinhood (HOOD), Black (SQ), Etsy (ETSY) and Apple Inc (AAPL). Apple actually slightly beat estimates (revenue by 0.3% and EPS by 5%) driven by strong Services, but by a lower magnitude than in the past. As well, disappointing guidance that revenues are expected to contract by a similar level (-1.4% YoY) led investors to reassess expectations and dwell that the PC & Smartphone markets will remain weaker for longer.

The Week Ahead

  • Another big week ahead for macro, with CPI for July expected to show mostly steady inflation from June. CPI, both headline and core, month-over-month is estimated at 0.2%, unchanged from June. On a year-over-year basis, headline CPI is expected to come in at 3.3% while core is expected to be unchanged at 4.8%. While the Fed targets PCE, not CPI, the CPI is the most widely reported inflation statistic.
  • Later in the week, we also get PPI and preliminary August consumer sentiment and inflation expectations. PPI final demand MoM is estimated at 0.2%, up slightly from 0.1% in June. PPI ex Food and Energy MoM is also estimated at 0.2%. ON a YoY basis, PPI final demand and PPI ex Food and Energy is estimated to up 0.7% and 2.3%, respectively.
  • Equities: For the Upcoming week, earnings seasons continues, but with fewer companies reporting. Tyson Foods (TSN), Palantir (PLTR), Skyworks (SWKS), Rivian (RIVN), Lyft (LYFT), Roblox (RBLX), Disney (DIS), TradeDesk (TTD) and UPS (UPS) are among names reporting this week.

Market Summary – Returns and Yields

Definitions, sources, and disclaimers


  • Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health. Source: Bureau of Economic Analysis (BEA).
  • GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
  • The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employmenthours, and earnings of workers on payrolls. CES National Estimates produces data for the nation, and CES State and Metro Area produces estimates for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and about 450 metropolitan areas and divisions. Each month, CES surveys approximately 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. Source: Bureau of Labor Statistics (BLS).
  • Initial Claims: An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility. Source: US Department of Labor (DOL).
  • The Consumer Price Index (CPI): Is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. Source: Bureau of Labor Statistics (BLS).
  • The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a percentage of the labor force. Source: Bureau of Labor Statistics (BLS).
  • The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work.Source: Bureau of Labor Statistics (BLS).
  • Advance Monthly Sales for Retail and Food Services: Estimated monthly sales for retail and food services, adjusted and unadjusted for seasonal variations. Source: United States Census Bureau.
  • Federal Open Market Committee (FOMC): Responsible for implementing Open market Operations (OMOs)–the purchase and sale of securities in the open market by a central bank—which are a key tool used by the US Federal Reserve in the implementation of monetary policy. Source: Federal Reserve.
  • The Federal Funds Rate: Is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. Source: Federal Reserve Bank of St. Louis.
  • The “core” PCE price index: Is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. Source: Bureau of Economic Analysis (BEA).

Sources: U.S. Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), U.S. Department of Labor (DOL), Federal Reserve, Federal Reserve Economic Database (FRED), Federal Reserve Bank of Atlanta, U.S. Census Bureau, Department of Housing and Human Development (HUD), U.S. Department of Agriculture, U.S. Energy Information Administration (EIA), U..S Department of the Treasury, Office of the United States Trade Representative (USTR), U.S. Department of Commerce, data.gov, investor.gov, usa.gov, congress.gov, whitehouse.gov, U.S. Securities and Exchange Commission (SEC), Morningstar, The International Monetary Funds (IMF), The World Bank (WB), European Central bank (ECB), Bank of Japan (BOJ), European Parliament, Eurostats, Organization for Economic Co-operation and Development (OECD), National Bureau of Statistics of the People’s Republic of China, Organization of the Petroleum Exporting Countries (OPEC), World health organization (WHO).

Financial Markets – Recent Prices and Yields, and Weekly, Monthly, and YTD (Table): Bloomberg, Weekly Market Data is in USD and refers to the following indices: Macro & Market Indicators: Volatility (VIX); Oil (WTI); Dollar Index (DXA); Inflation (CPI YoY); Fixed Income: All U.S. Bonds (Bloomberg Aggregate Index); Investment Grade Corporates (Bloomberg US Corporate Index); US High Yield (Bloomberg High Yield Index), Treasuries (ICE BofA Treasury Indices); Equities: U.S. Industrials (Dow Jones Industrial Average); U.S. Large Caps (S&P 500); U.S Tech Equities (Nasdaq Composite); European (MSCI Euope), Asia Pacific (MSCI AP), and Latin America Equities (MSCI LA); Sectors (S&P 500 GICS Sectors) Source: Bloomberg. Fed Funds Rate probabilities, Source: CME FedWatch Tool.  

Important Disclosures:

The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from Amerant Investments, Inc. or any of its affiliates to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

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