From the desk of Vance Howard:
The market traded just about spot-on to last week’s Wealth Watch, with the S&P 500 rallying up to the 3,900 area before the sellers came in to drive the index back down. Some of the reason for the rally was re-balancing of portfolios by fund managers, but that should be complete by the end of the week, and we could see the indexes sell off even more. The 3,648 area on the S&P 500 is critical. We could see the market selling off to retest this area of support, and if the market does not hold then the next level of support is around 3,422 on the S&P 500.
I expect that the next couple days might show prices attempting to stabilize, and we could possibly even see a minor bounce. However, trends are bearish, and I do not anticipate that Tuesday’s high of 3,945.86 will be taken out before prices make their way down to challenge and undercut 3,644, even if this might require a couple weeks.
The S&P Global Flash U.S. Composite PMI fell 2.4 points in June to 51.2, a 5-month low. Services declined 1.8 points to 51.6, below the consensus for unchanged. Manufacturing also swooned more than expected, dropping 4.5 points to 52.4, the lowest reading in nearly two years versus a consensus of 56.1.
The report highlighted the first decline in manufacturing output in two years, with the Output Index decreasing 5.6 points to 49.6. It also noted the first drop in new orders for goods and services since July 2020. Similarly, new export orders fell at the fastest pace since June 2020. Employment slowed and backlogs decreased for the first time in two years. Business confidence slumped to its lowest point since September 2020, as providers were less upbeat about the future.
Inflationary pressures were high with both input costs and output prices rising substantially, but at a slower pace. Wages were adding to operating expenses, but more discounts were being offered, thereby pressuring margins.
Vance Howard
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