Stocks and Bonds Mixed Despite Favorable Economic Data
Good morning,
The Dow (-0.6%), NASDAQ (+0.1%%), S&P 500 (+0.4%), and EAFE (+0.6%) finished the week mixed. Similarly, bonds were mixed with taxable bonds falling 0.1% and tax-free municipal bonds gaining 0.1%. The 10-year Treasury yield rose 0.05% to finish the week at 4.69%.
For the most part, stocks were modestly higher last week because of good inflation data and strong corporate earnings reports. However, the continued conflict in the Middle East and no apparent end in sight in the near term has restricted the markets from moving even higher. Key inflation data – the Consumer Price Index (CPI) and Producer Price Index (PPI) – exhibited positive results, as each reading showed that inflation is cooling slightly, with values lower than investors’ and economists’ expectations. Conversely, retail sales were slightly lower, and may be attributed to Amazon’s Prime Day being moved from July to June. Combined, these data put less pressure on the Fed to raise interest rates at its next meeting in September.
Going into last week, 88% of the S&P 500 companies had reported their earnings. The data has been remarkable, with earnings growth tracking at 51% year over year, the highest since the first quarter following COVID 5 years ago. Ten of the eleven S&P 500 sectors (all but healthcare) reported positive earnings growth, with three of the sectors exceeding 100%. Mega retailers Walmart and Target report their earnings this week, which should indicate the strength of the consumer. Next week, Nvidia will report its earnings, which will excite all eyes in the technology and AI sectors. Otherwise, trading volume is typically low during the final weeks of the summer, which can also add to volatility. All in all, it has been a fantastic earnings season, and fundamentally, that’s what stock prices are based on, so that is good news.
Have a great day and terrific week.
Source: Yahoo Finance
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The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
