Over the past week, markets pulled back and were down about 1.1% but today they continued to trade back toward recent highs with the Dow finishing Monday at 35,335 on lighter trading volume up 215 points. Tech stocks have been moving higher on strong volume as companies push back dates for when employees can head into the office again. Oil prices also rebounded today driving shares of energy companies up. Both IBD and BTS indicators continue to list markets in rally mode.
The Economy and Earnings
Retail earnings last week were good with Walmart leading the charge posting a 2% revenue rise and a 14% jump in net income. Shares moved up to an all-time high. Other retailers like Macy’s, Target, etc. reported good earnings as well showing that consumers are alive and well.
Lumber prices have fallen from a high of $1,700 per thousand to under $500 per thousand. High prices caused builders to curtail some projects all while mills continue to pump out boards. Mills are not sure when or at what prices lumber will find support but the good thing for mills right now is that they were able to pay down debt, pay employees bonus money and sock away cash for capital improvements. Meanwhile a hay shortage is brewing as typical hay producing regions like Eastern Montana and Southern Oregon have been hit by droughts and grasshoppers. Ranchers appear to be going east to buy hay from Wisconsin but since this is pricy they are also looking at culling herds which could send beef prices lower in the short term.
Housing construction in July fell 7% and Redfin reported that bidding wars for houses in Seattle is starting to cool. The latest earnings report from Home Depot showed a weakening in the DIY trend.
Last week, notes from the Federal Reserve said inflation will be around much longer than expected and could turn out to be higher than expected as well. Wages are rising along with energy and food prices, and this is being seen is subtle ways. McDonalds and KFC have pared back $5 and under food promotions and Warren Buffett said he is seeing substantial inflation with recent price increases holding. The latest inflation reading came in at a multi-year high of 5.4% and gurus are concerned that while the Fed keeps short term rates low in an effort to counter negative effects of the delta variant, long term rates could start to rise and negatively affect housing and mortgage rates. Only time will tell how this plays out but for now it looks like inflation will stick around for a while.
Items of Interest
The scouts have been busy. Troop 100 hosted a “new scout hike” this past week which is an annual event where we bring the lunkheads into the woods and teach them basics like setting up a tent and starting a stove without burning down that tent. Next week the older scouts will be hiking in the Royal Basin area of the Olympics. Yours truly will be on that hike which looks to be a good spot since there are no forest fires in the Olympics right now.