Inflation Fades, Markets Soar – July 14 Market Recap
Indices
- Dow 34,509, +775 or +2.30%.
- Nasdaq 14,113, +453 or +3.32%.
- MSCI EAFE 2188.99, +101.27 or +4.85%.
- S&P 4,505, +107 or +2.43%.
- USD10Y 3.819%, -23.1bp or –5.7%.
- WTI Crude $75.27 bbl, +$1.60 or +2.17%.
Inflation Fades
Last week investors were concerned with good economic data perhaps spurring the Fed into more than two additional rate hikes in 2023. This week’s inflation data poured cold water over those fears and gave investors hope that perhaps the Fed will complete their rate hike cycle after their next meeting on July 26.
The Consumer Price Index (CPI) had been expected to fall considerably given that the June 2022 number that was falling off the Year over Year (YoY) number was enormous, +1.2%. However, the June 2023 number was even less than expected at +0.2% which gave the markets a +3.0% YoY number, down substantially from last month’s +4% figure. The CPI has declined by more than half since the beginning of the year; +6.4% to +3.0%.
The following day, Thursday, the Producer Price Index (PPI), also known as wholesale prices, further confirmed the CPI numbers from the day prior. The MoM number was a mere +0.1% and the YoY number was also +0.1%, signifying virtually no inflation at the wholesale level. Wholesale inflation has now declined from +6.4% at the beginning of the year to +0.1% currently.
Markets Soar
Markets cheered the benign inflation news, and the indices enjoyed their best weekly performance since March of this year (Dow) and April 2022 (Nasdaq and S&P). With last month’s inflation data in the rearview mirror, the focus will turn to earnings this week and the Fed’s meeting and Fed Chair Powell’s accompanying statement and press conference the week after.
Next Week
Earnings season is here again already! The money center banks kicked off the proceedings on Friday with mixed results; JP Morgan Chase (JPM) was good, Citibank (C) and Wells Fargo (WFC) were also good, but with caveats which dragged the latter two lower. Next week market giants Netflix and Tesla report. In addition, further insights into the health of the economy will be revealed with trucking company JB Hunt, American and United airlines, as well as consumer staples company Johnson and Johnson amongst the many that will report earnings.
Economic Calendar
- Monday – July Empire State Manufacturing. Earnings:
- Tuesday – June Retail Sales. Earnings: Bank of America (BAC), Charles Schwab (SCHW), JB Hunt (JBHT), Lockheed Martin (LMT),
- Wednesday – N/A. Earnings: Netflix (NFLX), Tesla (TSLA), Goldman Sachs (GS), Internation Business Machines (IBM), United Air (UAL),
- Thursday – Initial Jobless Claims, July Philadelphia Fed Manufacturing Index, June Leading Economic Indicators. Earnings: American Air (AAL), CSX (CSX), Johnson and Johnson (JNJ).
- Friday – N/A. Earnings: American Express (AXP).
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July 14 Daily Trading Recap…
Monday – Dow +209 to 33,944, Nasdaq +24 to 13,685, S&P +10 to 4,409, USD10Y -4.4bp to 4.006%.
- Seven of eleven S&P sectors traded higher, led by Industrials, Health Care, and Energy.
- Twitter (TWTR) traffic is apparently plummeting with the advent of Threads, a new social media networking application attached to Meta’s (META formerly Facebook) Instagram application.
Tuesday – Dow +317 to 34,261, Nasdaq +75 to 13,760, S&P +30 to 4,439, USD10Y -2.6bp to 3.98%.
- Ten of eleven S&P sectors traded higher, led by Energy, Utilities, and Industrials
Wednesday – Dow +86 to 34,347, Nasdaq +158 to 13,918, S&P +32 to 4,472, USD10Y -11.9bp to 3.861%
- Nine of eleven S&P sectors traded higher, led by Communication Services, Utilities, and Materials.
- The June Headline Consumer Price Index (CPI) was even better than expected; month-over-month (MoM) fell to +0.2% vs +0.3% forecast and thus the year-over-year number fell to a 2-year low of +3.0%.
- June Core CPI (ex-food and energy) also fell more than expected to +0.2% vs +0.3% expected and the YoY number fell to +4.9%.
- Probabilities for a 25bp rate hike on June 26th barely moved on the news but farther out, probabilities of a pause at the 525 to 550 Fed Funds level rose.
Thursday – Dow +47 to 34,395, Nasdaq +219 to 14,138, S&P +37 to 4,510, USD10Y -10.0bp to 3.761%.
- Nine of eleven S&P sectors traded higher, led by Communication Services, Technology, and Consumer Discretionary.
- Jobless claims fell to 237,000 vs the 250,000 forecast and last week’s slightly revised higher print of 249,000 (vs 248,000 originally).
- June Wholesale Prices further confirmed the CPI data from yesterday, up +0.1% MoM and up only +0.1% YoY!
- Earnings: Pepsi Co (PEP) blew out their revenue and earnings expectations despite blaming lower volumes on higher prices and increased their 2023 revenue guidance. Delta Airlines (DAL) recorded record revenues and earnings on strong demand for international travel and lower fuel prices. DAL also boosted their full year guidance.
Friday – Dow +113 to 34,509, Nasdaq -24 to 14,113, S&P -4 to 4,505, USD10Y +5.8bp to 3.819%.
- Eight of the eleven S&P sectors traded down today, led lower by Energy, Financials, and Communication Services.
- July Preliminary University of Michigan Consumer Sentiment set a near two-year high at 72.6 vs 64.4 last month and 65.5 expected.
- Earnings: JPMorgan Chase (JPM) announced better than expected earnings and revenues even when excluding the benefits of their First Republic acquisition. Blackrock (BLK) beat on earnings but traded down on lower inflows. Citigroup (C) beat both their revenue and earnings expectations but traded down –4.05% on disappointing investment banking revenues. Wells Fargo (WFC) beat their earnings and revenue expectations and boosted their net interest income guidance for 2023. UnitedHealth Group (UNH) rallied +7.24% on better top and bottom-line results and increased the lower end of their full year guidance.
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.