As July comes to a close, we saw a big week for economic data. It has become clear that the broad economy is slowing down since the resurgence of Covid-19 cases, hospitalizations and deaths since mid-June.. Tech continues to be a bright spot in the markets. Many of the large tech companies announced their earnings this week; expectations for these stocks were sky high and they still beat estimates! We summarize below the second-quarter GDP numbers, plus earnings reports from several large U.S. companies.
Key Economic News
- Rising weekly jobless claims suggests the economic rebound from the pandemic is losing steam amid a renewed rise in Covid-19 cases.
- There was a lack of progress in congressional talks to agree on elements of a new coronavirus aid package. Expected changes include an extension of PPP and some amount of unemployment insurance; less certain is assistance to states and cities as they manage Covid-19 risks.
- April-May-June saw the steepest quarterly GDP decline on record, with a 9.5% decline in the quarter (often reported on an “annualized” basis, which would be a 32.9% decline annualized).
- Pending home sales surged for the second consecutive month (WSJ), rising 16.6% in June. Overall, existing home sales are expected to decline slightly for the year and new home sales are expected to rise slightly for the year.
- The Federal Reserve left interest rates unchanged as expected on Wednesday and indicated that it planned to keep rates near zero and do more if needed to provide support for the economy.
- Consumer confidence remains low and declined in July. Data: U.S. Bureau of Labor Statistics; Chart: Axios Visuals
- Recent job losses may be more permanent than initially hoped. In April, 78% of those in households with a job loss assumed it was temporary. As of July, 47% think that lost job is definitely or probably not coming back, according to the latest poll from AP.
- Fed chair Jerome Powell mentioned "lasting damage to the economy" as a major concern and a reason to continue providing support through fiscal and monetary policy.
- Economist Betsey Stevenson sees this damage in a long simmering childcare crisis that could have a significant impact on the number of parents, especially mothers, working over the next 20 to 30 years, creating a labor shortage.
- Amazon’s sales and profits surged, benefiting from the remote work boom. Amazon Web Services is one of the biggest sources of its profits, while the company spent $4 billion on PPE and other Covid-19 initiatives in its warehouse and shipping service.
- Alphabet (Google’s parent) reported a decline in revenue of 2% compared to a year ago, due to a rare decline in its digital ad operation.
- Apple’s sales rose 11% and they announced a stock split. (Stock splits are cosmetic, meaning they are designed to make buying shares easier for smaller customers, but otherwise have no impact).
- Strong earnings from P&G were reported, with P&G posting its strongest annual sales gain since 2006 as the pandemic kept consumers at home and vigilantly cleaning.
- Exxon and Chevron posted their worst losses in a generation after the virus outbreak and a global glut of crude oil combined to batter almost every part of their business.
- Caterpillar’s revenue in the US dropped more than 40% in the second quarter and they expect more declines in the current quarter.
Representative John Lewis, a giant of the Civil Rights Movement, was remembered at his funeral on Thursday by former Presidents. George Bush said, “He’s been called an American saint, a believer willing to give up everything, even life itself, to bear witness to the truth that drove him all his life: that we could build a world of peace and justice, harmony and dignity and love.” In that spirit, we are inspired to look for places in our own communities to make a difference, and to share harmony and love our neighbors.
We also want to take this opportunity to tell you that we are especially thankful this year for your presence in our lives, sharing your thoughts, your worries, and your stories. We hope you will continue to include us in the ranks of family, friends, and neighbors you can always call on for support.