While a pretty slow week on the economic data front, COVID concerns continued growing with record new cases across the U.S. Despite this, markets continued their upward trend with the S&P 500 up 1.76% on a total return basis. Next week Q2 earnings will be in the spotlight as big banks come out with their results. Expectations are fairly dismal, with the total S&P 500 earnings expected to be down nearly 45% and revenues down a bit worse than 10%. If the expected earnings decline is correct, it will be the largest year-over-year decline since 2008. Jobless claims slightly improved from the week prior, but are still stubbornly high. Even more, attention may be paid here as more companies run out of cash from the PPP loans/grants established by the CARES Act as well the expiration of extended unemployment benefits due at the end of the month. Readings of the strength of the service sector are mixed, similar to manufacturing surveys earlier this year. Markit’s U.S. Service PMI remains well into a contractionary territory (46.9), while the ISM index jumped well into the expansionary territory at 57.1 (vs. 45.4 last month). Readings above 50 in each survey indicate expansion. The Producer Price Index (PPI) unexpectedly declined last month. Expectations were for a 0.4% gain, which we saw in May as well. This was the fourth decline in five months, and further signals there is limited inflationary pressure in the economy.
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