It's almost August and with it comes the promise (surprisingly) of cooler temperatures. They are greatly needed and will hopefully close out the last full week of summer vacation for those with children in CCSD on a high note. We know there is a lot of planning that goes into the beginning of the school year -- don't forget to check out our Concierge Services webpage and see what Diazo can take off your plate.
And now onto the weekly recap:
The stock market registered gains on this busy week of earnings, economic, and central bank news. In aggregate, none of the events this week changed the market's view that has been driving recent gains. Participants continue to marvel at the resiliency of the US economy, expect that the Fed is close to being done raising rates, and hope that earnings growth will accelerate in the second half of the year.
The FOMC voted unanimously on Wednesday to raise the target range for the fed funds rate by 25 basis points to 5.25-5.50%, as expected. The policy directive also upgraded the description of economic activity to expanding at a moderate pace from continuing to expand at a modest pace in the June directive.
Expectations for a second rate hike at any of the meetings before the end of the year were largely unchanged. According to the CME FedWatch Tool, probability of a second rate hike at any of the remaining FOMC meetings this year remains under 30%.
The ECB followed suit the FOMC rate hike with a 25 basis points increase in its three key lending rates, although there is some speculation, driven by the language in its directive, that the ECB could also be close to being done raising rates.
Elsewhere, the Bank of Japan made no changes to its interest rates, but surprised market participants when it voted to conduct its yield curve control policy with greater flexibility, saying it will maintain the target rate at 0.5%, but will offer to purchase 10-yr JGBs at 1.0% every business day through fixed-rate purchase operations.
On the earnings front, Microsoft (MSFT), Alphabet (GOOG), and Meta Platforms (META) were the most influential movers. Microsoft's results were deemed a little disappointing when its revenue guidance didn't live up to bullish expectations, but it was a good report overall. Alphabet and Meta Platforms both delivered results and/or guidance that triggered some distinctly positive action in their prices.
Those gains, along with earnings-related gains in some blue chip names like Boeing (BA), McDonald's (MCD), and Dow Inc. (DOW), underpinned index performance.
The market continues to see a broadening out of the buying interest, although this week's gains were spear headed by the mega cap space. The Vanguard Mega Cap Growth ETF (MGK) rose 2.0% while the Invesco S&P 500 Equal Weight ETF (RSP) eked out a 0.2% gain.
The S&P 500 communication services sector was the best performer by a wide margin, rising 6.9%, reflecting the strong showing from Meta Platforms and Alphabet. Other top performers included the materials (+1.8%) and energy (+1.7%) sectors. Meanwhile, the utilities (-2.1%) and real estate (-1.8%) sectors saw the biggest declines.
This week also featured a series of economic reports that continue to validate the soft landing/no landing view. There was an uptick in consumer confidence, which was driven both by a pickup in views about current conditions and the outlook, another low level of weekly initially jobless claims, and a strong than expected 2.4% increase in Q2 GDP, which was up from 2.0% in Q1.
Rounding out the econ calendar was the June Personal Income and Spending Report, which showed solid spending and ongoing disinflation.
Next week will be even busier in term of earnings news. There's also some market-moving economic data in the form of the ISM Manufacturing and Services Indexes and the July Employment Report.
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.