Stocks Show Modest Gains in Volatile Week; Bonds Mixed
Good morning,
The Dow (+1.0%), NASDAQ (+1.6%), S&P 500 (+1.1%) and EAFE (+2.0%) all finished the week modestly higher. For the month of July, the Dow and S&P 500 were relatively flat, and international stocks were up about 2%, but the tech-heavy NASDAQ was down over 3%. Meanwhile, taxable bonds were down 0.1% last week while tax-free municipal bonds were up 0.1%. For the month of July, taxable bonds and tax-free municipal bonds were down 1.3% and 1.9%, respectively. The 10-year Treasury yield rose 0.03% to end the week at 4.71%, and up 0.27% for the month of July.
Two main themes continue to persist with the markets – the Middle East conflict and concerns with AI spending by large technology companies. The reduction in oil supply associated with the Strait of Hormuz created an initial shock in oil prices, which has impacted on inflation, thereby causing Treasury yields to rise. However, as the oil supply continues to be diminished, global concerns with dwindling stockpiles are beginning to become a greater concern. Thus, daily movements in the stock market are often a result of concerns or hopes of changes in the Middle East crisis.
Corporate earnings continue to flow in and are generally exceeding investors’ expectations, even with many of the large AI related companies. Despite the strong earnings reports, many of the big names are getting beat down because their spending on data centers and other AI growth is becoming a concern to investors, as they are asking, “Show me the money!”. In short, many of the big names are spending billions of dollars, but not showing corresponding revenue, and investors are not pleased by that.
Inflation readings for the month of June were very favorable because oil prices decreased, and the stock and bond markets reacted positively. Of course, that euphoria ended quickly once fighting began again with the US and Iran, renewing inflation concerns. Stepping back for a moment, the US economy continues to remain on strong footing, and corporate earnings have been strong. We need the conflict in the Middle East to end so inflation concerns are reduced, and we can focus back on the economy.
Have a great day and terrific week!
Source: Yahoo Finance
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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.
