Weekly Market Report: August 16th, 2024
Markets last week seemed reassured by the busy economic calendar and policy indications with volatility declining, equity markets registering solid gains, and bond yields largely unchanged. The S&P and NASDAQ delivered seven straight positive sessions on the back of the early August selloff, closing the week up 3.9% and 5.3% respectively. International developed (+3.8%) and emerging (3.2%) both enjoyed strong rebounds as well. Bond yields shrugged off the encouraging economic reports and cautious FedSpeak closing the week largely unchanged inside of 5 years and down slightly for maturities 10 years and beyond. The 10yr UST yield of 3.89% now sits almost exactly where it did when we began the year. The USD (-0.65%) and commodity complex (-0.37%) both closed down slightly with energy, grains, metals, and softs all down for the week, but gold did rally to set a new all-time high.
Market Anecdotes
- Equity markets welcomed last week’s busy economic calendar following recent concern surrounding a slowdown in the U.S. economy. The inflation, retail sales, and labor market indicators generally served to soothe markets.
- Economic data and FedSpeak last week translated to reduced market expectations for aggressive rate cuts where probabilities of a 50 bps cut at the upcoming September FOMC meeting fell from 51% to 26% but a 25 bps cut is carrying a 75% probability.
- As the Fed approaches an easing cycle Bespoke noted, despite cuts already from many central banks, the GDP weighted average global policy rate has only fallen 25bps since the 6%+ level.
- The unofficial close of 2Q earnings season with the Walmart report on Thursday leaves the S&P 500 with YoY blended earnings and revenue growth were 10.9% and 5.2%, respectively.
- A recent survey by Affirm showed 59% of respondents falsely believe the U.S. is currently in recession, likely due to the difficulty of inflation pressure on lower income households. The most recent Bloomberg survey shows 30% of economists expect recession within a year.
- A hazardous materials explosion at the world’s third busiest container port, the Ningbo Port in China, leading to its indefinite closure, is expected to impact key trans-Pacific trade lanes, supply chains during peak shipping season.
- An index from Eurekahedge which tracks hedge funds who utilize AI and machine learning theory suggests that portfolio manager jobs appear to be safe, at least for now with the S&P 500 dramatically outperforming, particularly since ChatGPT was launched.
Economic Release Highlights
- July CPI YoY Headline (2.9% vs 3.0%) and Core (3.2% vs 3.2%) along with MoM Headline (0.2% vs 0.2%) and Core (0.2% vs 0.2%) both registered generally in line with consensus estimates.
- July PPI YoY Headline (2.2% vs 2.6%) and Core (2.4% vs 3.0%) along with MoM Headline (0.1% vs 0.2%) and Core (0.0% vs 0.2%) came in below both forecast and prior month readings.
- The July NY Fed Survey of Consumer Expectations reported 3-year inflation expectations fell by 0.6% to 2.3% while median 1yr (3.0%) and 5yr (2.8%) were unchanged.
- July Retail Sales were above the high end of the forecast range and well above the spot forecast for Headline (1.0% vs 0.3%), Ex-Vehicles (0.4% vs 0.1%), and Ex-Vehicles & Gas (0.4% vs 0.3%).
- Weekly Jobless Claims were below the spot forecast and toward the low end of the range (227k vs 234k). The labor market has seen tour week moving average claims fall from 241k to 236.5k.
- The July NFIB Small Business Optimism Index registered 93.7, above both the spot forecast (91.7) and toward the high end of consensus range (91.6-92.0).
- August UofM Consumer Sentiment reading of 67.8 was slightly better than spot consensus 67.0 and within the forecast range (65.0-69.1).
- The Housing Market Index dropped in August to 39, missing the consensus estimate of 42.
- July Housing Starts (1.238M vs 1.342M) and Permits (1.396M vs 1.430M) slowed down from June and came in below estimates.
- July Industrial Production cooled relative to June’s strong 0.6% reading and came in below forecast (-0.6% vs -0.1%).
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