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One major feature of quality that fundamental investors look for in companies is profitability. That means the ability to translate revenue (top line) into profits (bottom line). Increasing profitability metrics over time suggests that a company is becoming more efficient.
We have written a blog post that dives into the world of profitability metrics, You can read it here.
The ISM® (Institute for Supply Management®) Non-Manufacturing PMI® fell to 50.3% in May, signifying a slowdown of expansion in the services sector, April’s reading was 51.9%. A PMI reading over 50 indicates monthly expansion in the services sector, which makes up almost two-thirds of the U.S. economy. The sector has been in expansion territory for 35 of the last 36 months, with the one contraction in December 2022. The report noted that business activity, new orders, and new export orders all slowed down, while employment contracted. The Business Activity Index registered 51.5%, a – 0.5 percentage point decrease, the New Orders Index registered 52.9%, a – 3.2 percentage points decrease, the New Export Orders Index registered 59.0%, a -1.9 percentage point decrease, and the Employment Index registered 49.2%, a -1.6 percentage point decrease. Inventory rebounded and price pressures eased as the Inventories Index expanded with a reading of 58.3%, up 11.1% percentage points and the Prices Index dropped 3.4 percentage points to 56.2%. Anthony Nieves, chair of the ISM® services business survey committee reported – “The majority of respondents indicate that business conditions are currently stable; however, there are concerns relative to the slowing economy.”
The U.S. Energy Information Administration (EIA) in its June 2023 Short-Term Energy Outlook (STEO) expects natural gas prices to increase over the summer as production declines. The Henry Hub spot price is forecast to average $2.66 per million British thermal units (MMBtu) in the second half of 2023 (2H23). The natural gas price at the Henry Hub is forecast to rise by almost 30% in 2024 to an average of about $3.42/MMBtu. U.S. dry natural gas production is to average almost 103 billion cubic feet per day (Bcf/d) in 2H23, down slightly from the estimate of about 104 Bcf/d for April and May. Global oil inventories are projected to decline slightly over the next five quarters, due to OPEC’s announcement to extend its crude oil production cuts through 2024. The Brent crude oil spot price is expected to average $79.54 per barrel in 2H23 and $83.51/bbl in 2024, up from its previous forecasts of $78.65/bbl in 2023 and $74.47/bbl in 2024. U.S. total petroleum consumption is projected to increase by 100,000 barrels per day (bpd) to 20.43 million bpd this year, down from the estimated 200,000 bpd increase projected in the May forecast.
The Labor Department reported an increase in initial jobless claims for the week ending June 3rd. The seasonally adjusted initial claims reported in 261,000, an increase of 28,000 from the previous week’s upwardly revised level. This is the highest weekly rate since October 30, 2021. The four-week moving average, which smooths out volatility, was 237,250, an increase of 7,500 from the previous week’s revised average. For the week ending May 27th, the insured unemployment rate was 1.2%. The total number of unemployment claims for the week ending May 27 reported at 1.757M down 37,000 from the previous week’s revised level. The continuing claims’ 4-week moving average was 1.784M, a decrease of 12,500 from the previous week. According to the unadjusted data for the week ending June 3rd – Ohio (+6,345), California (+5,173), Minnesota (+2,746), and Pennsylvania (+1,997) led the way for increases in initial claims. Connecticut (-2,350), New York (-1,243), and New Jersey (-830) all saw decreases. For the week ending May 20th, 1.635M people were receiving jobless benefits through state or federal programs, a decrease of 2,105 from the previous week. There were some 1.283M weekly claims filed for the comparable week in 2022.
Tuesday June 13 – CPI (MoM) (May)
Wednesday June 14 – Fed Interest Rate Decision
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