Market Synopsis: Stocks Down, Treasury Yields Up, Commodities Mixed, Dollar Up, Crypto Up/Flat
Past Week Events:
This Week's Events:
July CPI: Inflation Eases, But Prices Still High
In July, the Consumer Price Index (CPI) — a key measure of inflation — showed a modest slowdown, providing a glimmer of hope that the worst of the inflationary surge is probably in the rearview mirror. However, prices continue to rise. The CPI rose by 0.2%. On a yr-over-yr basis, prices rose to 3.2%, Core inflation, which excludes volatile food and electricity prices, rose similarly by 0.2% in July, a match to the rise in June. Despite the slowdown, the value of many goods and offerings stays excessive, pressuring American households.
July PPI: Producer Prices Climb, Indicating Continued Inflation Pressure
The Producer Price Index (PPI), which measures the average change over time in the selling prices received by domestic producers and their output, rose 0.3% in July, surpassing economists' expectations. This increase indicates that organizations are facing higher prices, which they could pass on to customers. On a year-over-year basis, the PPI surged by using 0.8%. The facts show that inflationary pressures are still present at the manufacturing level, which may potentially translate to higher consumer prices in the future.
Next Week:
The U.S. Leading Indicators Index will be released next week. This composite of 10 crucial economic indicators provides valuable insight into the future of the economy. The index’s purpose is to forecast future economic activity and analyze current economic trends. The previous report released demonstrated a -0.7% decline in these indicators, and the next report is forecasted to decrease by another -0.4%. Although this index is still in the negative zone, it has been improving compared to months ago.
Industrial Production will also be released next week. The Industrial Production Index, which is released by the Federal Reserve, reports the change in the U.S industrial production output. The last report indicated a -0.5% decrease, and this upcoming report is forecasted to flip to positive territory, with a 0.3% forecast.
Market Snapshot:
The predominant theme of the week was the persistence of inflation, which seems to be more tenacious than many had anticipated. This has led to heightened expectations for Federal Reserve rate adjustments, effectively erasing the dovish response to the previous week's jobs data. In the stock market, the Nasdaq faced a decline for the second consecutive week, hinting at concern among investors. The Dow, however, managed to secure gains, while the S&P and Small Caps, along with big tech, ended the week in the red. Oddly enough, the Volatility Index (VIX) ended the week lower. Treasury yields increased across the board, with longer term yields underperforming. The dollar ended the week on a high note, rebounding from the post-payrolls drop, driven by inflation data. The cryptocurrency market remained relatively stable, with Bitcoin hovering around the $29-30k range. Solana emerged as the top performer in the crypto space. In the commodities sector, gold faced the brunt of the losses, while crude oil remained stable.
Quip of the Week: "The four most dangerous words in investing are: 'This time it's different.'" - Sir John Templeton
U.S Equities:
Indexes(Week)
SPX 4,464.05(-0.31%), DJIA 35,281.40(0.62%),
NASDAQ 13,644.85(-1.90%), RUT 1,925.11(-1.65%)
Sectors:
The markets as a whole were pretty down this past week , but individual sectors had a wide variety of results. The energy sector carried its success from 2 weeks ago into this past week; OPEC has upped oil prices and tightening production of oil, which has caused the demand for oil to rise thus causing energy stocks to climb. Tech on the other hand, has been experiencing a bad stretch of weeks, with another week negative and this week especially bad at approximately -2.5%. This has been due to a handful of reasons, primarily pointing to high interest rates, persistent inflation, and poor performance of stocks within the tech sector. This week could specifically point to Roblox, as they missed earnings and had a massive selloff.
Treasuries:
U.S. Treasury Yields React to Inflation Data
U.S. Treasury yields experienced an uptick following the release of a slightly higher than predicted wholesale inflation for July. Specifically, the 12 months Treasury observed yield climbed close to eight basis points, settling at 4.16%, as the 2-year Treasury yield rose by over 7 basis factors, reaching 4.895%. The Bureau of Labor Statistics disclosed that the producer fee index (PPI) for July rose via 0.3%, barely surpassing the anticipated 0.2% month-over-month boom. These facts came on the heels of Thursday's client fee index (CPI) record, which revealed a 3.2% year-on-year boom in costs for July, marginally below the predicted 3.3%. However, except for the risky sectors of food and strength, the center CPI saw an every year upward thrust of 4.7%.
Commodities:
Oil
Global Crude Oil Dynamics Shift Amidst Demand and OPEC Decisions
Crude oil's global landscape is undergoing large adjustments as OPEC decisions come into play. China, a first-rate participant inside the oil market, has been ramping up its crude oil purchases, leading to a surge in demand. This increased demand from China is normally driven by means of its strategic choice to reinforce its reserves. On the supply side, OPEC, the oil cartel comprising foremost oil-generating countries, has been careful. Despite the obvious upward push in demand, OPEC has been reluctant to increase its production tiers significantly. This choice is prompted by means of different factors, such as the geopolitical considerations of key members like Saudi Arabia and Russia. The mixture of demand and limited supply has exerted upward strain on oil prices.
Gold
Gold prices were hurt this week by inflation data (CPI and PPI). Inflation data came in slightly better than expected, but this did not make investors optimistic. Despite inflation data coming in better than expected, no one expects the Fed to assume inflation has been defeated. Rate hikes may or may not continue, and this possibly has hurt gold.
Crypto:
BTC -29,386.10, 0.72% ETH - 1,846.47, 1.11%
BTC Graph (5-day)
The publication of the long awaited Bitcoin ETF has been put to a halt by the SEC. An ETF, which would vastly expand the reach of the world of cryptocurrency to the public, needs more time for its application to be under review.
Europe:
Stoxx 600- 459.17, -0.02% DAX- 15,832.17, -0.75% FTSE 100 -7,524.16, -0.53%
DAX Chart (5-day)
Future rate hikes are coming closer to reality for the Bank of England as their economy grew Q2 exceeding many analysts' predictions. Reaching pre-covid levels, the English economy and its growth will make it hard for the Bank of England to pause rates as inflation seems persistent.
Asia:
XJO (Australia)-7,340.1, -0.20% Shanghai 180 Index-8,264.02, -3.24% Nikkei 225- 32,473.65, -0.98%
XJO Chart (5-day)
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