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Choppy Waters but PCE to Provide Direction (Aug 19 Market Recap)

August 21, 2022

Choppy Waters but PCE to Provide Direction (Aug 19 Market Recap)

Indices 

  • Dow 33,706 (55) or (0.16%). 
  • Nasdaq 12,705 (342) or (2.6%). 
  • S&P 4,228 (52) or (1.2%). 
  • USD10Y 2.989% +14.0bp or +4.9%. 
  • WTI Crude $89.95/bbl (2.1%).

Choppy Waters 

It was an uneven trading week with currents and cross currents galore. Manufacturing numbers were horrible out of New York, but the Philadelphia data crushed expectations. Home Depot (HD), Lowe’s (LOW), and Walmart (WMT) reported solid quarters, but Target (TGT) missed theirs. July Retail Sales were flat month over month but that was largely due to the sizeable decrease in gasoline prices over the same time period. Jobless claims decreased week over week for the first time in nine weeks and last week’s print was revised lower as well, showing that the labor market is still strong. Finally, the Federal Reserve was back in the spotlight with the release of the minutes of their last meeting at the end of July. As market observers poured over every word, the consensus was that the committee was turning dovish, and a smaller rate hike might be considered come their September meeting. Of course, the next day, St Louis Fed President Bullard stated he was in favor of another 75bp rate hike at the next meeting. All in all, a confusing and somewhat confounding week.  

PCE to Provide Direction 

On Friday, the government will release the July Personal Consumption Expenditure (PCE) data. Will the number confirm the slowdown in inflation that the July CPI and PPI data suggested last week? If so, the market will likely ignore Fed President Bullard’s hawkish comments last week and begin to price in a smaller rate hike during the September meeting which should rally the markets. Of course, if the number is hotter than expected, a 75bp hike will likely be confirmed and markets will struggle to rally higher especially considering this week’s strong labor data. 

Next Week 

It’s retail earnings week; Nordstrom (JWN), Macy’s (M), Dick’s Sporting Goods (DKS), Petco (WOOF), Gap Stores (GPS) and Dollar General (DG) all report. However, all eyes will be upon the Headline and Core Personal Consumption Expenditure report due on Friday. 

Economic Calendar 

  • Monday – N/A. 
  • Tuesday – August U.S. Manufacturing and Services PMI (flash), July New Home Sales. 
  • Wednesday – July Durable Goods Orders. 
  • Thursday – Initial Jobless Claims, Revised Q2 GDP. 
  • Friday – July Core PCE, August University of Michigan Consumer Sentiment (final), August University of Michigan 5-year Inflation Expectations (final). 

If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review. 

Aug 19 Daily Trading Recap… 

Monday – Dow +151 to 33,912, Nasdaq +80 to 13,128, S&P +17 to 4,297, USD10Y (5.8bp) to 2.791%. 

  • Nine of eleven S&P sectors traded higher today, led by Consumer Staples, Utilities, and Technology. 
  • Aug Empire State Manufacturing was a disaster at –31.3 vs expectations of +5.0 and last month’s +11.1 print. 

Tuesday – Dow +239 to 34,152, Nasdaq (25) to 13,102, S&P +8 to 4,305, USD10Y +3.3bp to 2.824%. 

  • Six of eleven S&P sectors traded up today, led higher by Consumer Staples, Consumer Discretionary, and Financials. 
  • Earnings: Home Depot (HD) beat top and bottom-line estimates and reaffirmed full year guidance; HD traded up 4.06% in the normal session. Walmart (WMT) beat their recently lowered guidance and raised their full year earnings outlook. WMT traded up 5.11% in the regular session.

Wednesday – Dow (171) to 33,980 Nasdaq (164) to 12,938, S&P (31) to 4,274, USD10Y +6.9bp to 2.893%. 

  • Ten of eleven S&P sectors traded down today, led lower by Communication Services, Materials, and Consumer Discretionary. 
  • The FOMC minutes were released and were largely judged as dovish. Speculation grew that the September rate hike may now decline from a 75bp hike to a more benign 50bp hike as the committee said the size of hikes would be data dependent. 
  • July Retail Sales were flat month over month largely due to the decrease in gasoline prices. 
  • Earnings: Target (TGT) missed their numbers and traded down 2.69% in the regular session. Lowe’s (LOW) beat earnings but missed on revenues and traded up 0.58% in the regular session. 

Thursday – Dow +18 to 33,999, Nasdaq +27 to 12,965, S&P +9 to 4,283, USD10Y (1.3bp) to 2.88%. 

  • Seven of eleven S&P sectors traded higher today, led by Energy, Technology, and Utilities. 
  • Jobless claims printed at 250,000 claims vs 260,000 expected and last week’s revised lower 252,000 print (originally was 262,000). Continuing claims rose slightly to 1.437 million. 
  • August Philadelphia Fed Manufacturing was an upside surprise at 6.2 vs expectations of –5.0 and last month’s print of –12.3. 
  • July Existing Home Sales were in line at 4.81 million vs last month’s 5.11 million print. 
  • St. Louis Fed President pushed back on the dovish interpretation of yesterday’s Fed minutes release, saying he was in favor of a 75bp hike in September. 
  • Earnings: Cisco Systems (CSCO) beat numbers, increased their revenue guidance for the current quarter and traded up 5.81% in the regular session. Kohl’s (KSS) cut its full year outlook and fell 5.4%. 

Friday – Dow (292) to 33,706, Nasdaq (260) to 12,705, S&P (55) to 4,228, USD10Y +10.9bp to 2.989%. 

  • Nine of eleven S&P sectors traded down today led lower by Consumer Discretionary, Financials, and Technology. 

If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review. 

Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, and TSLA. 

Category iconEducation Tag iconinflation,  market recap

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