The Week in Review: 7/15/2024
“Constantly seek criticism. A well thought out critique of whatever you’re doing is as valuable as gold.” – Elon Musk
Good Morning,
The stock market ultimately logged gains last week, but there wasn't a lot of conviction in the first half of the week in front of market-moving events.
The June Consumer Price Index and Producer Price Index were released Thursday and Friday, respectively.
Total CPI deflated 0.1% month-over-month, slowing the pace of growth to 3.0% on a year-over-year basis from 3.3% in May. Core-CPI, which excludes food and energy, decelerated to 3.3% on a year-over-year basis from 3.4%.Total PPI was up 0.2% versus an expected 0.1% increase and Core PPI was up 0.4% versus an expected 0.1% increase.
The CPI report overshadowed the PPI report and fueled optimism about the path of inflation and Fed policy. The fed funds futures market is pricing in a 94.4% probability of a rate cut at the September FOMC meeting, up from 77.7% one week ago.
Treasury yields sank in response to the data, acting as support for equities. The 10-yr note yield fell eight basis points to 4.19% and the 2-yr note yield declined 14 basis points to 4.46%.
Last week's calendar also featured the start of earnings season when JPMorgan Chase, Wells Fargo, and Citigroup reported results ahead of Friday's open. Their quarterly results brought negative responses unfortunately, despite beating earnings estimates.
Fed Chair Powell's semiannual monetary policy testimony before the Senate Banking Committee and the House Financial Services Committee did not receive a big response from bond or equity markets. There were no surprises in his remarks, which featured an acknowledgement that the "likely next direction" of policy will be a loosening of policy, indicating a rate hike is not likely.
Losses in the mega cap space limited gains for the S&P 500 and Nasdaq Composite last week. Money was rotating away from mega caps due to profit taking activity and moving into areas of the market that have trailed so far this year.
Nasdaq Composite: +22.6% YTD
S&P 500: +17.7% YTD
Dow Jones Industrial Average: +6.1% YTD
Russell 2000: +6.0% YTD
The top performing S&P 500 sectors last week included the rate-sensitive real estate (+4.4%) and utilities (+3.9%) sectors, along with the materials (+3.0%) and industrial (+2.4%) sector.
This week we will get more economic news… Retail Sales, Housing Starts, Jobless Claims and Leading Indicators.
Our markets continue to rise amidst calls for market correction and recession…. we still see the glass as half full.
Have a wonderful week!!
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