Hello, this is Claire Rubin, Private Bank Investment Strategist at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices finished mostly lower last week amid the continued spread of the delta variant of COVID-19, expectations for Federal Reserve bond purchase tapering later this year and geopolitical tensions. The benchmark S&P 500 Index fell 0.6% in total return for the week, while the blue-chip Dow Jones Industrial Average fell 1.0% and the tech-heavy Nasdaq Composite Index dropped 0.7%. The yield on the U.S. 10-year Treasury fell 2 basis points last week to end Friday at 1.26%. The U.S. dollar strengthened versus major peers.
Investors remain concerned about the path forward for economic growth as the delta variant continues to spread in the U.S. and abroad. The White House is now recommending vaccine booster shots for most Americans eight months after their second shot. This is subject to authorization by the U.S. Food and Drug Administration. The first to receive the boosters would include healthcare providers, residents of long-term care facilities and other older adults.
Retail sales fell more than anticipated in July, dropping 1.1% after a revised-higher 0.7% gain in June. The decline was led by auto dealers and e-commerce, while sales at restaurants and bars increased for another month, though at a slower pace. Housing data also disappointed, with residential starts down 7% last month to a three-month low. Building permits, a proxy for future construction, rose 2.6%, led by a pickup in applications for multifamily homes.
Minutes from the Federal Reserve’s July meeting were released last week, which showed officials believe the "substantial further progress" required for asset purchase tapering has not been met for the maximum employment mandate but has been for price stability. Fed watchers now expect tapering to begin later this year.
In the week ahead, Federal Reserve officials meet in Jackson Hole. The meetings and corresponding interviews may provide insight into the central bank’s tapering timeline. Vice President Kamala Harris travels to Singapore and Vietnam this week to discuss the global semiconductor shortage, trade and the pandemic. The Tokyo Paralympics begin without spectators, similar to the 2020 Olympics. On the U.S. economic calendar, we’ll be monitoring additional housing data, durable goods orders, personal income and spending, and the second estimate of second quarter economic growth.
The events in Afghanistan dominated headlines last week, though financial markets historically ignore geopolitical tensions. President Joe Biden spoke again Sunday, stating that the U.S. has expanded evacuation efforts beyond the perimeter of the Kabul airport. The president said more than 25,000 people have been evacuated since August 14. The administration is discussing pushing back the August 31 withdrawal deadline for U.S. troops out of Afghanistan.
As always, we’ll be watching and reporting back to you. Thank you.