Tech Rally Drives Equities to Near Record Highs

 

Tech rally drives risk assets higher.  While the timeline for the stimulus bill and vaccine still unclear, equity markets have been slowly advancing throughout August.   Major indices rose yesterday with the S&P 500 on the cusp of another record, closing up 0.3%.  The DJIA fell 0.3% while the Nasdaq rose 1% to hit another all-time record.  Treasury yields and swap rates reversed direction from last week’s dramatic rise to close moderately lower across the curve.  Yields are trading 1-2 bps lower this morning.

 

 

Headline loan growth for July has fallen.  According to the Fed’s H8 data, loan growth has fallen 11% with deposits rising 2%.  Overall balances of the banking system are down $326 billion in July from May’s high, the main driver being a decline in C&I.  After falling 51% in June, C&I continued its decline into July by falling an additional 33%.  Overall loan volumes fell by $9 billion for the week ending August 5th, $7 billion due to the drop in C&I, $3 billion due to a fall in consumer loan balances, and $1 billion offset by a rise in real estate.

 

 

Housing starts rose by 22.6% in July, beating economist expectations.  After falling to a record low in April, the figure has rebounded over the past few months.  Permitting activity also rose dramatically, up 18.8% from June.  The rise comes after the home builder’s confidence index increased to 78 to hit a new all-time record.  All three indicators (prospective buyer traffic, expectations of future sales, and current single-family home sales) that make up the overall index rose, driven mainly by historically low mortgage rates.