Market Synopsis: Stocks Up, Treasury Yields Mixed, Commodities Up, Dollar Up, Crypto Down
Past Week Events:
This Week's Events:
Leading Economic Index Declines for 15th Month in a Row, No Recession Yet: The Leading Economic Index (LEI), an indicator of future economic activity, fell by 0.7% in June, marking its fifteenth consecutive month-to-month decline. This steep drop is often visible as a signal of an impending recession. However, regardless of this trend, the U.S. Financial system remains strong overall, displaying few symptoms of a fast-approaching downturn. Seven out of the ten indicators that make up the LEI fell in June. The Conference Board, which compiles the LEI, predicts a recession from the third quarter of 2023 to the primary area of 2024, due to the ongoing tightness in economic policy.
U.S. Retail Sales Barely Rise in June, Indicating Weak Spots within the Economy: Retail sales in the U.S. Noticed a meager increase of 0.2% in June, falling below the forecasted 0.5% This modest increase displays adjustments in consumer spending behavior and suggests a few areas of weakness in parts of the economy. The shortfall was largely due to a decrease in spending at gasoline stations. While retail income generally provides insights into the nation's economy, they have come to be less dependable as a bellwether as Americans are spending greater on services than items.
Next Week:
The FOMC decision on United States’ interest rates will be on Wednesday at 2pm. Most analysts are predicting that this will be the last rate hike before the Federal Reserve starts to pause or even cut interest rates. This is largely due to recent inflation data illustrating an optimistic near-future for the market, with the majority of inflation reports coming in cooler than before. A 25 bps hike is expected, but in the chance that the Fed decides to not hike rates at all the market will go haywire.
The Personal Consumption Expenditures (PCE) price index is a tool that gauges consumer spending on goods and services. It provides valuable insights into the impact of inflation on the market by filtering out random price fluctuations of specific goods, thereby focusing solely on the effects of inflation. The PCE index is akin to the Consumer Price Index (CPI), both of which are crucial for tracking inflation.The upcoming week's PCE index, scheduled for release on Friday, will significantly influence the market's direction for the week's end. The previous month's year-over-year PCE was recorded at 3.8%, with the core PCE at 4.6%. Analysts are predicting a core PCE of 4.2% for the forthcoming month, indicating an expected slowdown in inflation.
Market Snapshot:
This week, the financial markets experienced a mostly positive summer week. Even with US Macro data surprising to the downside, marking the biggest weekly drop since February 2019, the equity market melt-up, except for Nasdaq, was largely undisturbed. The Dow had its best week in four months and is up 10 days in a row, marking its longest winning streak since February 2017. The Nasdaq, on the other hand, recorded its 3rd weekly loss in the last 5 weeks. The reason for the Nasdaq's underperformance lay within a few major tech names like NVIDIA and TESLA significantly underperforming. Tesla dropped almost 10% on earnings that disappointed Wall Street. Bank earnings dominated the early week with Morgan Stanley outperforming and Citigroup not so much. Treasuries were mixed this week with the shorter term yields underperforming. The cryptocurrency market was basically flat on the week with Bitcoin and Ethereum underperforming. In the commodities market, oil and gold managed gains
Quip of the Week: "Rule No. 1: Most things will prove to be cyclical. Rule No. 2: Some of the greatest opportunities for gain and loss come when other people forget Rule No. 1." -
Howard Marks, co-founder of Oaktree Capital Management
U.S Equities:
Indexes(Week)
SPX 4,536.34(0.69%), DJIA 35,227.69(2.08%),
NASDAQ 14,032.81(-0.57%), RUT 1,960.26(1.51%)
Sectors:
The success or fall of sectors this week was largely driven by the earnings of companies within these sectors. Nvidia and Tesla got pummeled this past week, with TSLA being down 7.59% and NVDA down 2.55%. TSLA dropped due to their earnings disappointing the market. On the other hand, bankers in the financial sector were one of the top performers due to their impressive earnings. Their eps came in at 1.24 which is a positive surprise from the forecasted 1.14 eps. Overall, the performance of the market and its sectors greatly varied due to different earnings and companies.
Treasuries:
Treasury yields remain mixed as traders count on the Federal Reserve’s next action: U.S. Treasury yields had been relatively mixed by Friday, as traders weighed rates in anticipation of next week’s Federal Reserve meeting. The 10-year Treasury yield declined slightly by way of 0.0047% to 3.837%, whilst the 2-year saw a small increase of less than 1 bp, to 4.844% The Federal Reserve is predicted to discuss monetary policy at its July 25 and 26 meetings. Investors will be eyeing the Federal Reserve’s decision and thoughts on monetary policy very closely.
Commodities:
Oil
Oil Prices Rally amidst Tightening Supply and Economic Stimulus in China: Oil prices noticed a large spike, with Brent crude futures up $1.43 and U.S. West Texas (WTI) crude prices increasing $1.42 consistent a barrel. This upward thrust in prices, marking the fourth consecutive week of gains, is attributed to developing proof of supply shortages seen to be coming. Growing tensions between Russia and Ukraine could, in addition, affect supplies. In the U.S., crude inventories have fallen due to a surge in crude exports and higher refinery usage. Additionally, the Energy Information Administration (EIA) forecasted a possible decline in U.S. Oil and gasoline manufacturing in August. China's sluggish financial system is showing symptoms of reinvigoration because of newly added stimulus measures aimed toward boosting sales of automobiles and electronics. These elements combined have brought about a bullish outlook for oil prices in the near term
Gold
Gold stayed relatively stable this week ending around 0%. Gold has been going up this past month, seeing a monthly 1.35%. Interest rates and gold have an inverse relationship, and so with optimism of future rate pauses or cuts gold has benefited. This past week was relatively stable though, as past optimism is cooling down and the market is waiting for next week's interest rate decision which will have an effect on gold.
Crypto:
BTC -29,893, -0.83% ETH - 1,887, -1.24%
BTC Graph (5-day)
Ripple, who recently won a lawsuit against the SEC, may again be in trouble. The SEC has insinuated that they may appeal this decision. Amidst optimism in the crypto market for Ripple’s win against the SEC, the crypto market ended the week on a bad note.
Europe:
Stoxx 600- 465.40, 0.99% DAX -16,177, 0.45% FTSE 100 -7,663, 3.08%
DAX Chart (5-day)
The European markets ended with another positive week, highlighted by the FTSE 100 index rallying up 3.08%. Large part of this rally was due to positive inflation data in Britain this past week. The European markets have been largely optimistic the past few weeks, and investors are now prepping for next’s week agenda full of interest rate decisions.
Asia:
XJO (Australia)-7,313, 0.15% Shanghai 180 Index-8,106, -1.83% Nikkei 225- 32,304, -0.27%
XJO Chart (5-day)
Opmerkingen