It’s good to be back home! After I’m done prepping this update, Laura and I will be prepping some homemade chicken wings and burgers, gearing up to watch the US vs. Vietnam game in the FIFA Women’s World Cup. By the time you’re reading this Saturday morning, hopefully the US has secured its first win in Group Play! It will be an exciting journey, as the US team looks to make history with an unprecedented three-peat! How are you spending your weekend?
And now onto the weekly recap:
Most of the major indices logged another winning week. The Dow Jones Industrial Average extended its winning streak to ten straight sessions highlighted by a sizable gain on Thursday, which was led by Johnson & Johnson (JNJ), IBM (IBM), and Travelers (TRV) following their earnings reports.
This week's trading featured a broadening out of buying interest. Mega caps were relative underperformers due to profit-taking activity and valuation angst ahead of a big week of mega-cap earnings that will feature results from Alphabet (GOOG) and Microsoft (MSFT) on Tuesday, and Meta Platforms (META) on Wednesday.
The Vanguard Mega Cap Growth ETF (MGK) fell 1.0% this week. The Invesco S&P 500 Equal Weight ETF (RSP), meanwhile, gained 1.4%.
Tesla (TSLA) and Netflix (NLFX) were top laggards, experiencing some consolidation following their better than expected Q2 earnings results. Taiwan Semiconductor Manufacturing Co. (TSM) was another losing standout after warning about customers' continued inventory adjustment due to dampening end market demand. TSM also reported better than expected earnings and revenue.
Elsewhere, bank stocks outperformed following a slate of earnings news and commentary that did not imply any meaningful concerns about a recession. Starting with strong gains in Bank of America (BAC) on Tuesday, Northern Trust (NTRS), M&T Bank (MTB), Western Alliance (WAL), and U.S. Bancorp (USB) all logged nice gains after their earnings reports.
The SPDR S&P Regional Banking ETF (KRE) jumped 7.5% this week while the SPDR S&P Bank ETF (KBE) rose 6.7%.
By and large, market participants continue to trade off the notion that the U.S. economy will avoid a hard landing, that the Fed is close to done raising interest rates, and that earnings growth will return in the second half of the year.
The soft landing view was corroborated by this week's economic releases. Weekly initial jobless claims came in at the lowest level (228,000) since Mid-May, which was good news regarding the state of the labor market. The retail sales report, meanwhile, looked weak at first with total sales declining 0.2%. Control group sales, which factor into the computation for personal spending in the GDP report, were up a solid 0.6%.
Housing data was more softish, but still didn't contain anything alarming. Total housing starts declined 8.0% month-over-month to a seasonally adjusted annual rate of 1.434 million and building permits decreased 3.7% month-over-month to a seasonally adjusted annual rate of 1.440 million.
With the soft landing narrative still intact, market participants were inclined to fade mega caps and buy and non-tech and value stocks. There is less valuation angst among those stocks, which led to the preferential treatment this week. The Russell 3000 Value Index rose 2.1% while the Russell 3000 Growth Index fell 0.5%.
The S&P 500 health care sector (+3.5%), boosted by Johnson & Johnson (JNJ) and Abbott Labs (ABT), and energy sector (+3.5%) saw the biggest gains. The communication services sector, meanwhile, was the top laggard by a decent margin, falling 3.0%.
There was an uptick in Treasury yields this week, yet the bond market is still respecting a multi-month trading ranging. The 2-yr note yield rose 13 basis points to 4.85% and the 10-yr note yield rose three basis points to 3.85%.
The data provided is for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. The information contained here is not guaranteed as to accuracy or completeness. All economic and performance information is historical and does not guarantee future results.
The Dow Jones Industrial Average is a price-weighted index comprising 30 widely traded blue chip U.S. common stocks. The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the NASDAQ stock exchange. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Cboe Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. Weekly and year-to-date figures for the VIX show percentage changes, not investment returns. The Russell 2000 Index tracks the performance of approximately 2,000 publicly traded small-cap companies in the United States. It is not possible to invest directly in an index.
The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the U.S. Federal Reserve. The spread measures the difference in yield between two government securities. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve. Year-to-date changes in U.S. Treasury bond yields are shown in basis points (bps). One hundred basis points equals one percent.
Oil prices are represented by West Texas Intermediate (WTI) crude oil.
The G20 countries comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, and over 75% of global trade.