Tucker Financial Weekly Market Review: July 26th, 2024

Weekly Market Report: July 26th, 2024

Markets last week were focused on added political uncertainty, second quarter earnings reports, and a relatively busy economic calendar which included data points on both inflation trends and growth indicators. Equity markets continued to see consolidation in larger cap and technology names while smaller cap and value areas have remained resilient. The capitalization-weighted S&P 500 fell 0.8% while the equal-weighted S&P 500 gained 0.8% and Russell 2000 rallied 3.5%. International developed (-0.15%) and emerging (-0.89%) markets both traded slightly lower. Bond yields again moved slightly lower on the week leaving the 10yr UST yielding 4.20% while commodities traded lower in sympathy with WTI falling 3.7% to close at $77.16.

Market Anecdotes

• Nearing the midpoint of the second quarter earnings season, the S&P 500 is showing blended earnings growth of 9.8% with beat rates and beat margins of 78% and 4.4%. respectively.
• Recent trading days have looked like a mirror image of the first half of the year with the ‘magnificent seven’ and growth stocks experiencing some consolidation while the ‘other 493’ companies have held up relatively well.
• Bespoke noted the twelve trading days since July 11th have seen the NASDAQ 100 fall 8.3% and Russell 2000 rise 9.3% which is the second most extreme 12-day reversal since 1985. The soft CPI report and increased odds of a Trump victory are two potential drivers behind the rotation.
• BCA noted the U.S. consumer has remained resilient right up to past recessions but labor market deterioration, tight bank lending standards, and mostly spent pandemic era excess savings do pose headwinds to the consumption-oriented U.S. economy looking forward.
• Another soft inflation read last week (PCE), particularly in the market-based core measure which Powell and FOMC members have emphasized, alongside continued softening labor market data have firmed up rate cut expectations from market participants.
• The PBoC cut the 1-year medium term LFR by 20bps to 2.3% following a 10-bps cut in three other reference rates earlier in the week. China strategists continue to view rate cuts as simply accommodative, not stimulative, holding out for more aggressive central government action.

Economic Release Highlights

• July YoY PCE inflation was generally in line with expectations for both headline (2.5%) and core (2.6%) alongside MoM readings of headline (0.1%) and core (0.18%). Personal income grew slightly less than forecast (0.2% vs 0.4%) and PCE was in line with spot consensus at 0.3%.
• The July Flash PMI (C,M,S) registered 55.0, 49.5, 56.0 with a soft read on manufacturing and strong read on services sector activity.
• July European PMIs (C,M,S) were generally in line with Eurozone (50.1, 45.6, 51.9) and U.K. (52.7, 51.8, 52.4)
• 2Q U.S. GDP of 2.8% QoQ AR (3.1% YoY) was well above consensus forecast of 2% and Personal Consumption Expenditures registered 2.3%, also above spot consensus of 1.9%.
• New (617k vs 640k) and Existing (3.890M) Home Sales both came in below consensus forecast, declining at a monthly and annual pace of 5.4%.
• Durable Goods Orders in June fell 6.6%, well below the spot consensus of 0.3% and forecast range of -2.3% to 0.8%. Ex-Transportation (0.5% vs 0.2%) and Core Capital Goods (1% vs 0.2%) both exceeded the consensus forecast.
• The UofM Consumer Sentiment index was generally in line, registering 66.4 versus spot consensus of 66.0.