Market Synopsis: Stocks Up, Treasury Yields Mixed, Commodities Mixed, Dollar Up, Crypto Down
Past Week Events:
This Week's Events:
Federal Reserve Increases Interest Rates, Signals More Hikes may Come: The Federal Reserve has raised interest rates by 25 basis points, signaling that it is prepared to take further action if necessary. This move is a part of the Fed's ongoing efforts to scale back inflation and stabilize the economy. They have indicated that they are prepared to make additional increases to interest rates if economic conditions warrant it.
Fed Staff No Longer Forecasts U.S. Recession: The Federal Reserve's body of workers has revised their financial forecast, declaring that they now are not expecting a U.S. Recession. This alternative outlook is due to the resilience of the economy. They do, however, now anticipate a major slowdown in the accelerated growth starting later this year. They do not foresee a recession.
PCE Inflation Cools in June: The personal consumption expenditures (PCE) index, a key inflation gauge closely monitored by the Federal Reserve, showed signs and symptoms of cooling in June. The core PCE, which excludes food and energy prices, rose by means of just 0.2% from the previous month, whilst the yearly rate fell to its lowest level. This gauge shows that inflation pressures are indeed easing.
Next Week:
The unemployment rate will also be released next week. The unemployment rate is the number of people who are unemployed but are actively looking for work. The unemployment rate has expressed an obvious trend of contraction since high pandemic levels. The unemployment rate was at 3.6% last month, and this upcoming report is forecasted to come in again at 3.6%.
The S&P Global Manufacturing and Services PMI Flashes for the month will be reported. These are excellent indicators for the United States’ productivity in manufacturing and service sectors. Last month’s services PMI was at 52.4, indicating growth in the services industries. The Manufacturing PMI was still below 50 at 49.0 last month, indicating a possible contraction in the manufacturing sectors. These indicators are forecasted to stay where they were last month, but this month’s report will see if the manufacturing PMI can finally go above 50.
Market Snapshot:
This week, major shifts were seen in the financial world due to a decision by Japan's central bank, the Bank of Japan (BOJ). They tried to modify their yield curve control, a tool used to influence the country's economy, which initially caused a surprise in the markets but ultimately failed to have the desired impact. The BOJ hoped to allow for more fluctuation in interest rates and transition towards a more standard monetary policy. However, this backfired, resulting in a roller-coaster ride for the Japanese yen: it first rose in value against the US dollar, but then plummeted to 141 yen to the dollar. In the stock market, the S&P 500, a major US index, closed at its highest point since April 2022. Almost all sectors participated in the run up except for energy, utilities, and REITS. Meanwhile, the Volatility Index (VIX), which measures expected market volatility, dropped significantly, indicating that investors predict a stable market ahead. The bond market also had a busy week. The interest rate on a 10-year loan to the Japanese government (10Y JGB yield) climbed to 0.56%, its highest since 2014. In contrast, the interest rate on a similar loan to the US government (10Y Treasury) slipped back under 4%. Turning to the commodities market, where physical goods like oil and grains are traded, the price of Brent crude oil, a benchmark for global oil prices, rose to $84.80, the highest it has been since mid-April. Additionally, wholesale gasoline prices reached their peak for 2023.
Quip of the Week: "The only function of economic forecasting is to make astrology look respectable." -
John Kenneth Galbraith
U.S Equities:
Indexes(Week)
SPX 4,582.23(1.01%), DJIA 35,459.29(0.66%),
NASDAQ 14,316.66(2.02%), RUT 1,981.54(1.09%)
Sectors:
Most sectors ended positive this week, with communications being the leading sector by a wide margin. The market was fairly optimistic after the fed meeting, as the fed staff announced that they no longer forecast a recession in the future. Communications saw this massive rally due to stocks within the sector like Meta, and Alphabet exceeding earnings expectations. Meta particularly rallied as well partially due to its announcement of the logo change to an X.
Treasuries:
Treasury Yields Surge Following Strong GDP Report and Fed Rate Hike: U.S. Treasury yields experienced a jump on Thursday, as buyers digested the implications of the Federal Reserve's recent hike and a strong GDP growth. The 10-year U.S. Treasury yield rose above the important 4 percent level. The 12 months Treasury yield jumped more than 10 basis points to 4.931%. This rise in yields came in response to the Commerce Department's report that GDP grew at a 2.4% annualized rate in the 2nd quarter, surpassing economists' estimates of 2.0% growth.
Commodities:
Oil
Oil Prices Rise Amid Tightening Supply: Oil prices realized an increase this week, marking the 5th consecutive week of gains. Investors continue to be positive that the combination of robust demand and deliver cuts will maintain to prop up oil prices. This optimism is fueled by means of the anticipation that the U.S. The Federal Reserve and European Central Bank are nearing the end of their rate tightening campaigns, which is anticipated to reinforce global growth and energy demand. Supply cuts introduced by the OPEC alliance earlier this month have additionally bolstered oil prices, with oil benchmarks gaining nearly 5% for the week. Brent crude settled seventy five cents higher to $84.99 a barrel, whilst U.S. West Texas Intermediate (WTI) crude rose 49 cents to $80.58 a barrel.
Gold
Gold had a rollercoaster ride this past week. On the 27th Gold saw a pretty significant selloff as U.S economic data reports came in strong. Gold was able to rebound back to around neutral on Friday as the Federal Reserve hiked rates. Though it ended the week around neutral, it still saw its worst week in about 5 weeks.
Crypto:
BTC -29,293, 0.40% ETH - 1,873, 1.29%
BTC Graph (5-day)
The crypto market had an overall good week, with BTC getting really close to bypassing the resilient 30,000 mark. Etherium also had a great week, which can be attributed to overall positive market sentiment but also the progression of Etherium 2.0.
Europe:
Stoxx 600- 470.78, 1.16% DAX -16,469, 1.81% FTSE 100 -7,694, 0.40%
DAX Chart (5-day)
The EU recently conducted its routine “stress test.” The stress test was born after the financial crisis of 2008, and this test was generated to ensure banks have enough capital if we were to enter a period of serious economic turmoil. Though not named, three banks are reportedly falling short of what is believed to be a necessary amount of capital for them to hold.
Asia:
XJO (Australia)-7,403, 1.23% Shanghai 180 Index-8,508, 4.96% Nikkei 225- 32,759, 1.41%
XJO Chart (5-day)
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