Hey Folks, money flow into the US markets set records this week as buyers stepped in across many different sectors. Will it last? Get my take in this week’s Round-Up
MARKET SOUND BITES:
Markets recorded a solid week of gains, as investors appeared to celebrate positive news on both the inflation and growth fronts, which together bolstered hopes that the economy might achieve a “soft landing.” By the end of the week, analysts polled by FactSet were estimating that the overall earnings for the S&P 500 had expanded by 10.9% in the second quarter versus the year before, which would mark the fastest pace since the end of 2021. Coming soon is the expected first rate cut by the US Feds in 4 years. “Boom Boom” Powell will keynote an address on Friday, Aug 23rd at 10 AM ET at the Feds Annual Jackson Hole WY Symposium. All told, the Feds raised rates 11 times to 5.25% – 5.50%, which they have maintained since July 2023.
Along with Walmart’s guidance, official economic data suggested that the consumer was holding strong in the face of the cooling labor market. On Thursday, the Commerce Department reported that retail sales surged 1.0% in July, their best showing in 18 months. The week’s inflation data also seemed to support sentiment. On Tuesday, we saw that core PPI was flat in July, ending three months of solid increases while CPI on Wednesday, was more in line with expectations but also seemed to reassure investors. Notably, the year-over-year increase in CPI fell below 3.0% for the first time in well over three years to 2.9%. On Friday we saw that actual housing starts fell to their lowest level in four years. Similarly, a gauge of builder sentiment released Thursday fell to its lowest level of the year.
The yield on the benchmark 10-year Treasury note decreased through most of the week on the benign inflation data but jumped Thursday morning following the strong retail sales data.
In Britian, we saw that headline inflation in the UK ticked up to 2.2% in July from 2.0% in June. However, growth in services prices—a focus for policymakers—slowed more than forecast, prompting financial markets to price in a higher likelihood of interest rate cuts later this year. The economy remained strong in the three months through June. GDP expanded 0.6% sequentially, following a solid rebound in the first quarter after last year’s recession. And in the Euro Zone the economy expanded 0.3% sequentially in Q2, the same rate as in Q1. Industrial production contracted 0.1% in June, falling short of a consensus estimate for a 0.5% increase while the purchasing managers’ survey suggested business activity stalled in July as well. Even so, the labor market remains resilient. Eurostat data showed that employment in the second quarter expanded 0.2% sequentially.
Japan’s markets rebounded strongly over a holiday-shortened week, with the Nikkei 225 Index gaining 8.7% with GDP expanding more than anticipated in Q2. On an annualized basis, GDP expanded 3.1% vs consensus estimates of 2.1%.
In China, July data highlighted weakness in China’s economy. Industrial production rose a below-consensus 5.1% in July from a year earlier, slowing from June’s 5.3% increase, partly due to lower auto sales. And Retail sales expanded a better-than-expected 2.7% in July from a year earlier, up from a 2% increase in June. On the real estate front, new home prices in 70 cities fell 0.7% in July, unchanged from the pace of declines in the prior two months and marking the 13th straight monthly drop, according to China’s statistics bureau continuing to act as a drag on the overall Chinese economy.
Enjoy This Week’s Round Up
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
