No Sign of a Recession Here

By Alex Eule  |  Monday, August 1

New Month, New Problems. Major indexes snapped a three-day winning streak, temporarily putting an end to July's optimism. The S&P 500 soared 9% last month, its best July performance since 1939. Today, the large-cap index slipped 0.3%. 

After last week's wave of earnings, economic, and monetary news, today's trading felt quiet. A below-average 10.3 billion shares traded hands. 

While stocks dipped, the day did bring some positive news on the economic front. Manufacturing activity dipped to its lowest level since June 2020, according to the Institute for Supply Management, though activity is still expanding. The prices component of the manufacturing report is also still growing, but it slowed dramatically from June, a sign that inflation is easing. 

Highlights from the manufacturing report don't read like an economy that's in recession: 

The U.S. manufacturing sector continues expanding -- though slightly less so in July -- as new order rates continue to contract, supplier deliveries improve and prices soften to acceptable levels. According to Business Survey Committee respondents' comments, companies continue to hire at strong rates, with few indications of layoffs, hiring freezes or headcount reduction through attrition. 

Economic sentiment is now largely in a holding pattern until Friday's July jobs report. Economists expect nonfarm payrolls to be up 250,000, with the unemployment rate holding steady at 3.6%. 

A different, less tangible worry filled markets Monday, though, with speculation growing that House Speaker Nancy Pelosi planned to visit Taiwan in the coming days. China, which considers Taiwan to be its territory, has warned the U.S. against the trip and hinted at some form of retaliation if it happens.

Shares of Taiwan Semiconductor Manufacturing, the world's largest manufacturer of chips on behalf of other companies, including Apple and Qualcomm, fell 2.4% on the day. Most of the world's most advanced chips are made in Taiwan, making any aggression from China a significant risk for tech investors. 

"Rising tensions amongst the two world largest economies won’t support risk appetite anytime soon," Oanda analyst Edward Moya wrote today. 

DJIA: -0.14% to 32,798.40
S&P 500: -0.28% to 4,118.63
Nasdaq: -0.18% to 12,368.98

The Hot Stock: Boeing +6.1%
The Biggest Loser: Royal Caribbean Group -7.5%

Best Sector: Consumer Staples +1.3%
Worst Sector: Energy -2.1%