Weekly Market Update | July 31, 2023

Weekly Market Update | July 31, 2023

Weekly Market Recap

July 30, 2023

Volume 10, Issue 31

Weekly Recap

Domestic stocks moved higher last week, which was notable for the Dow Jones Industrial Average’s notching its 13th consecutive daily gain on Wednesday, which marked its longest winning streak since 1987. Growth stocks handily outpaced their value counterparts, and the gains were led by the technology-heavy Nasdaq Composite. Sentiment appeared to get a boost from a series of generally positive economic readings, particularly on inflation. 

Stocks opened sharply higher on Friday, following news that the Fed’s preferred inflation gauge, the core (less food and energy) personal consumption expenditures (PCE) price index had risen 0.2 percent in June, down from 0.3 percent in May, making for a year-over-year increase of 4.1 percent, a tick lower than expectations and the slowest increase since September 2021. Moreover, the employment cost index – closely watched because of policymakers’ continued concern about wage inflation – rose 1.0 percent in the second quarter, also below consensus and the smallest increase in two years.

Last week’s data also suggested that the economy might manage a soft landing and skirt a recession even as borrowing costs increased. On Wednesday, the Commerce Department reported that the economy had expanded at a year-over-year pace of 2.4 percent in the quarter, well above both the previous quarter’s growth rate of 2.0 percent and consensus expectations of around 1.8 percent. Both businesses and consumers appeared to remain in good shape and spending freely. Durable goods orders jumped 4.7 percent in June, while personal spending rose 0.5 percent. Pending home sales also rose unexpectedly.

The Fed announced a 0.25 percent increase in the federal fund’s target rate following the conclusion of its two-day policy meeting on Wednesday, as expected. The tone of the Fed’s official statement was received as relatively benign, however, and expectations grew that the Fed was done raising rates, at least for the year. In his post-meeting press conference, Fed Chair Jerome Powell acknowledged that “restrictive” monetary policy was now “putting downward pressure on economic growth and inflation,” but he stressed that further changes to interest rates would be guided by incoming data. According to the CME FedWatch Tool, futures markets ended the week pricing in only a 27.4 percent chance of further rate hikes by the end of the year compared with a 90.8 percent chance the week before (and before the Fed’s action).

Friday’s reassuring inflation data helped push down U.S. Treasury yields somewhat, but the yield on the benchmark 10-year U.S. Treasury note still ended the week sharply higher on the strong growth signals.

Market Monitor

A full listing of market performance data is available here

DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks.  
Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.

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In The News

Members of the Federal Reserve’s Open Market Committee approved another 25-basis point interest rate increase Wednesday, after previously pausing the hiking campaign at the committee’s July meeting. The central bank’s target federal funds rate range is now between 5.25 and 5.5 percent—the highest level since 2001. Fed Chair Jerome Powell declined to say whether additional hikes are to come at the September meeting but noted the Fed’s staff are no longer forecasting a recession. He also stressed that policymakers at the central bank would watch incoming economic reports and make decisions about interest rates based on that information.

Faster economic growth this spring raises the prospect of a longer post-pandemic expansion despite the Federal Reserve pushing interest rates to a two-decade high. Gross domestic product grew at a seasonally- and inflation-adjusted 2.4 percent annual rate in the second quarter, the Commerce Department announced Thursday. That was faster than economists expected and above the 2 percent growth in the first three months of the year.

Employers spent 1 percent more on wages and benefits between April and June compared with the prior three months, the Labor Department announced Friday. That was a slowdown from a 1.2 percent increase in the first quarter. The employment-cost index, a measure of compensation growth closely watched by Fed officials, rose 4.5 percent last quarter from a year earlier, a slowing from a 4.8 percent increase between January and March.The personal-consumption expenditures price index, the Fed’s preferred inflation measure, rose 3 percent in June from a year earlier, the Commerce Department announced in a separate Friday report. That was down from a 3.8 percent rise the prior month.

Worker filings for unemployment benefits, a proxy for layoffs, declined by 7,000 last week to a seasonally adjusted 221,000, the Labor Department announced Thursday. That was the lowest level since February and close to 2019’s average of about 220,000.

U.S. economic growth slowed and eurozone activity contracted in July, according to surveys released on Monday, suggesting a darkening outlook for the global economy.
Wall Street has dialed back its recession forecasts.

Charts of the Week

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Good Reads

I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; most can be overcome here.

This is the best thing I read last week. The funniest (it’s also true). The most interesting (beautifully written, with lots to chew on and disagree about). The most ridiculous. The least surprising

America the Bountiful: The U.S. today accounts for 58 percent of the output of the G-7 group of leading nations, compared to 40 percent in 1990. Investors who put $100 into the S&P 500 in 1990 would have more than $2,000 today, four times what they would have earned had they invested elsewhere in the rich world. Incomes for the country’s poorest fifth have risen in real terms by 74 percent since 1990.

“The older we get, the fewer things seem worth waiting in line for.”

~ Will Rogers

* Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor.

This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets.

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