Rally Continues, Awaiting Rate Cuts – Aug 16 Market Recap
Indices
- Dow 40,659, +1162 or +2.94%.
- Nasdaq 17,631, +886 or +5.29%.
- S&P 5,554, +210 or +3.93%.
- MSCI EAFE 2374.84, +91.20 or +3.99%.
- USD10Y 3.892%, -5.0bp or -1.27%.
- WTI Crude $76.76 bbl, -$0.22 or -0.29%.
Rally Continues
Last week the markets continued to rebound from the panic selling of August 2 – August 7 as the recession narrative was quickly turned on its head with jobless claims falling below expectations and dropping considerably from two weeks ago and more importantly, a strong showing from the U.S. consumer who pushed retail sales up +1.0% vs last month. The S&P 500 is now just 2% off its record high of 5667 attained on July 16.
Awaiting Rate Cuts
Wholesale Prices as represented by the Producer Price Index (PPI) were better than expected with headline year-over-year PPI falling to +2.3%. Retail prices, or the Consumer Price Index (CPI) fell to +2.9%, its lowest reading since March 2021. As a reminder, while the Fed prefers to use the Consumer Price Expenditure (CPE) tool to monitor inflation, both PPI and CPI are widely followed by both the public, the financial press, and the markets. The Fed’s stated goal is inflation at 2% and we now have the following data points (all numbers are year-over-year): CPE +2.5%, CPI +2.9%, PPI +2.3%. The decks have been cleared for the Fed to start cutting rates.
The CME Fed Watch Tool now predicts a nearly 100% probability of a rate cut at the Fed’s September 18 meeting with a 71.5% likelihood of a 25bp cut, and a 28.5% chance of a 50bp cut.
The Upcoming Week: Aug 19 – Aug 23
It is a very light week for both economic data and earnings. Multiple Fed representatives speak on Monday and Tuesday. On Wednesday, the minutes from the July FOMC meeting will be released.
A few more retail stragglers report earnings this week; Lowe’s, Target, Macy’s, TJ Max, and Ross Stores.
Economic Calendar
- Monday – N/A. Earnings: N/A.
- Tuesday – N/A. Earnings: Lowe’s (LOW).
- Wednesday – July FOMC minutes. Earnings: Target (TGT), Macy’s (M), TJ Maxx (TJX).
- Thursday – Initial Jobless Claims, August Flash S&P U.S. Services and Manufacturing PMI. Earnings: Ross Stores (ROST).
- Friday – N/A. Earnings: N/A.
If you know of any friends or family members who could benefit from our services and these types of communiques, we are accepting new clients and offer a complimentary one-hour review.
Last Week‘s Daily Trading Recap…
Monday – Dow -140 to 39,357, Nasdaq +35 to 16,780, S&P +0 to 5,344, USD10Y -3.3bp to 3.909%.
- Eight of eleven S&P sectors traded down today, led lower by Real Estate, Communication Services, and Consumer Staples.
Tuesday – Dow +408 to 38,765, Nasdaq +407 to 17,187, S&P 500 +90 to 5,434, USD10Y -5.7bp to 3.852%.
- Ten eleven S&P sectors traded higher today, led by Technology, Consumer Discretionary, and Communication Services.
- The July Producer Price Index (PPI) was better than expected at +0.1% vs +0.2% expected and vs last month’s +0.2% print. Year-over-year the PPI fell to 2.3% from 2.7% last month.
- The July Core PPI fell -0.1% vs expectations of +0.2% and vs last month’s +0.3% print. Year over year Core PPI fell to +2.4% vs last month’s +3% print.
- Earnings: Home Depot (HD) beat earnings and revenue estimates but guided 2024 lower; HD traded up +1.23%.
Wednesday – Dow +242 to 40,008, Nasdaq +5 to 17,192, S&P +20 to 5,455, USD10Y -3.2bp to 3.82%.
- Eight of eleven S&P sectors traded higher today, led by Financials, Energy, and Technology.
- The July Headline Consumer Price Index was in line with expectations at +0.2%. Year- over-year, the headline number fell to +2.9%, the lowest it has been since March 2021.
- Core PPI was also in line with expectations at +0.2%, bringing the year-over-year figure to +3.2% vs +3.3% last month.
- Earnings: Cisco Systems (CSCO) beat top and bottom-line expectations and announced a 7% reduction of their global workforce; CSCO traded up +6.51% in the extended session.
Thursday – Dow +554 to 40,563, Nasdaq +401 to 17,594, S&P +88 to 5,543, USD10Y +10.6bp to 3.926%.
- Nine of eleven S&P sectors traded higher today, led by Consumer Discretionary, Technology, and Materials.
- Jobless claims fell to 227,000 vs 236,000 forecast and vs. last week’s slightly revised higher print of 234,000 (originally 233,000).
- July U.S. Retail Sales rebounded strongly to +1.0% vs +0.3% expected and vs -0.2% last month.
- The August Empire State Manufacturing Survey rebounded a touch to -4.7 vs -6 expected and vs -6.6 last month.
- The Philadelphia Federal Manufacturing Survey was worse than expected at –7 vs 7.9 expected and vs 13.9 last month.
- Earnings: Walmart (WMT) beat top and bottom-line expectations and raised their 2024 forecast; WMT traded up +6.58%. Applied Materials (AMAT) beat both top and bottom-line expectations but traded down -2.56% post close.
Friday – Dow +96 to 40,659, Nasdaq +37 to 17,631, S&P +11 to 5,554, USD10Y -3.4bp to 3.942%.
- Eight of eleven S&P sectors traded higher today, led by Financials, Utilities, and Technology.
If you know of any friends or family members who could benefit from our services and these types of communiques, 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, ACHR, AVGO, and BITB.