Author: admin

The third week in July was another interesting one for investors as some data came in stronger than expected. For example, retail sales were flat over the past month compared to an expected drop of .3 percent. Core retail sales were up .4 percent compared to an expected increase of just .1 percent.

Those types of numbers would likely give the Federal Reserve pause to cut rates in the near future. However, it is also important to remember that a slowing labor market is also a reason to cut interest rates. After Tuesday’s retail sales numbers were better than anticipated, Thursday’s unemployment claims report showed that there were more requests for benefits than expected.

Over the past seven days, there were 243,000 claims compared to an expected 229,000. The 243,000 figure was also higher than last week’s 223,000 claims. As it’s unusual to see such volatility in the summer months, the unexpected increase could be a sign that the economy is slowing.

Of course, these weren’t the only data points available to market participants this week. On Monday, the Empire State Manufacturing Index came in a negative 6.6, which was lower than the anticipated negative 5.5. However, the Philly Fed Index came in at 13.4 compared to an expected 2.7 on Thursday.

On Friday, Fed member John Williams spoke and said that long-term trends indicate that the neutral rate is lower than the current rate. In other words, there is evidence to suggest that an interest rate cut in September could be appropriate. At a minimum, his words indicate that there will be sufficient cause for interest rate cuts at some point in the near to intermediate future.

Fed Chair Jerome Powell also seemed to agree with that sentiment during remarks he made on Monday. Powell said that there was confidence that the market was going to return to 2 percent inflation, but he also cautioned that he wasn’t going to signal that a rate cut was coming at any particular time. Therefore, everyone will just have to wait to see what the Fed decides to do between now and the end of the year.

The S&P 500 finished the week down 134 points to close at 5,505. This was a loss of 2.38 percent for the week for a market that has returned just over 21 percent over the last 12 months. The weekly high of 5,663 was made on Monday morning at about 11 a.m. while the weekly low of 5,499 was made on Friday afternoon.

The Dow finished the week up 20 points to close at 40,287, which was a gain of .05 percent for the previous five trading days. The market would make its high of the week on Thursday when it reached 41,365 and made its low of the week on Friday when it dipped to 40,230.

Finally, the Nasdaq plunged 4 percent this week to close at 17,726. It would open the week at 18,591, which was its highest point, before freefalling toward the low. On Friday, the market would close at its lowest point of the previous five trading days.

International markets were also quite busy this week as Canada announced its most recent inflation numbers on Tuesday. The Bank of Canada (BOC) revealed that median inflation was 2.6 percent on an annualized basis compared to an expected 2.7 percent. New Zealand announced inflation rose .4 percent over the last quarter compared to an expected .5 percent while inflation in Great Britain was 2 percent on an annualized basis compared to an expected 1.9 percent.

The European Central Bank (ECB) kept its main refinancing rate at 4.25 percent on Thursday. Finally, on Friday, Great Britain and Canada announced that retail sales had dropped over the past month. Sales lagged by 1.2 percent in Great Britain and by .8 percent in Canada.

The upcoming week is going to start slow but likely finish with a flurry of volatility. In the United States, GDP data is expected to be released on Thursday while the Core PCE Price Index is released on Friday. Flash Manufacturing PMI and Flash Services PMI in the United States and throughout the Eurozone will be released throughout the day on Wednesday.

This week was a pivotal one for market participants who were hoping for a rate cut in the near future. On Thursday, monthly and annual CPI figures were released, and for the most part, they came in better than expected. On an annual basis, inflation came in at 3 percent, which beat the expected 3.1 percent prior to the release.

On a monthly basis, Core CPI was up .1 percent while overall CPI was down .1 percent. Core CPI was expected to be .2 percent for the month while overall CPI was expected to be .1 percent. Shortly after the news broke, Fed member Goolsbee posted a message on X saying that the numbers were to be expected if inflation were moving back toward 2 percent.

The good news sparked speculation that the Fed might be ready to cut interest rates as soon as September. Fed Chair Jerome Powell and other members of the Fed have acknowledged that policy is restrictive, and economic data has continued to show a slowdown in economic activity.

On Tuesday and Wednesday, Powell testified to members of the House and acknowledged that inflation is not the only hazard the economy faces. In addition, a labor shortage could also cause a recession or other problems for consumers and businesses. Therefore, if hiring begins to slow, it may also be a reason to cut rates even if inflation isn’t all the way back to 2 percent.

Powell also said that he was somewhat confident that inflation was going back to 2 percent and that there was no set number in mind before rate cuts could occur. He also declined to provide any guidance as to when the first cut would occur, so a September cut is still little more than speculation at this point.

On Friday, the Price Producer Index (PPI) was released and seemed to be at odds with Thursday’s developments. The Core PPI on a monthly basis increased by .4 percent while the prices of all goods went up by .2 percent. It was expected that Core PPI would go up by .2 percent while overall PPI would go up by .1 percent.

However, many who have had a chance to dive deeper into the data say that the increase is largely attributable to random volatility. Ultimately, the notion that inflation is cooling is the correct one and that rate cuts should still be on the table at some point this year.

In other news this week, unemployment claims came in at 222,000 compared to an expected 236,000. On Friday, the University of Michigan released its consumer sentiment and inflation expectation reports. They found that consumer sentiment dipped to 66 percent compared to an expected 68.5 percent. It was also revealed that consumers believed inflation would be at 2.9 percent 12 months from now.

The S&P 500 continued to make new highs as it finished the week at 5,615. During the last five trading days, the market gained 40.88 points, which was a .73 increase. The market made its low of the week on Monday when it dipped to 5,563 and made its high of the week on Friday when the market hit 5,651.

The Dow finished up 447 points to finish at just over 40,000. On Tuesday morning, the Dow reached its low of the week when it dipped to 39,190. On Friday afternoon, the market made its high of the week at 40,234.

The Nasdaq finished at 20,331, which was a dip of .23 percent for the week. The market would make its high of the week on Wednesday at 20,667 before falling to its low of the week 20,173 on Thursday afternoon.

In international news, the Bank of Japan (BOJ) reportedly intervened in the foreign exchange (FOREX) markets on behalf of the Yen on Thursday. The intervention reportedly cost the BOJ the equivalent of $22 billion. On Tuesday night, New Zealand announced it was holding its core interest rate steady at 5.5 percent. On Thursday morning, Great Britain announced that its gross domestic product (GDP) grew by .4 percent on a monthly basis.

The upcoming week will feature a few key news releases with the first coming on Monday when the Empire State Manufacturing report is released. On Tuesday, retail sales data will be made public while unemployment claims data comes out on Thursday. Jerome Powell is also scheduled to talk on Monday afternoon.

Even with a shortened trading week due to the Independence Day holiday, there was plenty of news released to keep investors occupied. The first major piece of news came out on Monday when the ISM Manufacturing PMI figure was released. It came in at 48.5 percent, which indicates that the manufacturing sector is in a recession. The June figure was lower than last month’s 48.7 percent as well as lower than the projected 49.2 percent.

On Tuesday, the Jobs Openings and Labor Turnover Survey (JOLTS) report was released. It found that there were 8.41 million jobs available in June, which was higher than the expected 7.96 million. It was also higher than last month’s revised total of 7.92 million.

Jerome Powell spoke on Tuesday and said that significant progress has been made on inflation. He also said that he expects the inflation rate to be around 2.5 percent this time next year. Powell also sought to discourage notions that rates couldn’t go back to where they were during the pandemic. During that period, the key rate was set at 0 percent.

A few important releases were made public on Wednesday. First, the ADP nonfarm payroll report found that the economy added 150,000 jobs in the past month. This was lower than the expected 163,000 jobs added and lower than last month’s gain of 157,000 positions.

The ISM Services PMI was next to be released on Wednesday and came in at 48.8 percent, which was far lower than the expected 52.6 percent and was also below last month’s figure of 53.3 percent. This has led some to say that the economy is finally starting to show signs of a true slowdown, which may make it easier to justify lower interest rates.

Finally on Wednesday, the FOMC meeting minutes from June were released. The main takeaway from those minutes was that inflation was moving in the right direction to see possible rate cuts later in the year. However, the Fed still wanted more evidence that this was the case before taking action.

Markets were closed for the holiday on Thursday, but they made up for lost time with some consequential news on Friday morning. The Bureau of Labor Statistics (BLS) released its nonfarm payroll report that said 206,000 jobs were added over the previous month. This was more than the 191,000 expected prior to the release but fewer than the 218,000 added last month.

It’s also worth noting that initial figures from April and May were revised downward. The April figure was revised downward to 108,000 from 165,000 while the May report was changed to 218,000 from an initial reading of 272,000. The unemployment number jumped to 4.1 percent, and this is the third straight month in which this figure has increased.

Average hourly earnings increased .3 percent on a monthly basis in June, which matched expectations. However, it does represent a slight slowdown from the .4 percent increase in May.

The S&P 500 finished the week up 67.82 points to close at 5,567. The index made its low of the week on Monday morning when it dipped to 5,447 and closed the week at its highest point.

The Dow was flat this week closing up 67.46 points to finish at 39,375 at the end of trading Friday. The low of the week was made on Monday morning at 39,115 while the high was made on Wednesday morning when the market hit 39,389.

Finally, the Nasdaq would close the week above 20,000 for the first time as it gained over 540 points to finish at 20,391. That represented a 2.74 percent gain for a market that has gained more than 21 percent during 2024.

On Tuesday and Wednesday, Jerome Powell is expected to testify in front of the House Financial Services Committee. On Thursday, inflation data is set to be released while price change data will be released on Friday.