Weekly Market Recap – July 28, 2023
The S&P 500 recorded its third consecutive positive weekly outcome, gaining approximately 1%, while the NASDAQ saw a rise of about 2%. The Dow, on the other hand, enjoyed a remarkable 13-day upward trend until Wednesday, making it the longest positive streak for the index since 1987. However, the streak came to an end on Thursday, with the Dow still finishing the week up nearly 1%.
As anticipated, the Fed resumed its rate-hiking approach after a pause in June. The central bank raised its key benchmark rate by a quarter-percentage point, reaching the highest level since 2001. This was the 11th rate increase since March 2022, which began due to rising inflation.
The U.S. economy showed signs of improvement in the second quarter, easing concerns about a recession following the interest rate hikes. The GDP expanded at an annual rate of 2.4%, surpassing economists’ consensus forecast and an improvement from the 2.0% rate in the first quarter of the year.
During the current earnings season, companies in the S&P 500 experienced a sixth consecutive decline in their profit margins. The average net profit margin midway through the season was 11.1%, compared to 12.2% in the same quarter the previous year, according to FactSet data. The highest margin was 13.0% in the second quarter of 2021.
The Fed’s preferred inflation indicator indicated that consumer prices rose at a slower pace in June compared to the previous two years. The Personal Consumption Expenditures Price Index increased at an annual rate of 3.0%, down from 3.8% in May. Excluding volatile food and energy prices, core inflation climbed 4.1% in June versus 4.6% in May.
Following the recent interest rate hike by the Fed, the yield of the 10-year U.S. Treasury bond closed above 4.00% for the fourth time this year on Thursday. However, it slightly receded to around 3.97% on Friday, still significantly higher than the previous week’s closing level of 3.85%.
The European Central Bank also raised its key interest rate to 3.75% and hinted at a potential pause in its rate-hiking cycle by September. While this rate is the ECB’s highest in 22 years, it remains lower than the U.S. Federal Reserve’s current benchmark rate range of 5.25% to 5.50%.
A monthly update on the U.S. labor market is expected on Friday, which will reveal if the slowdown in jobs growth that occurred in June persisted into July. In June, the economy added 209,000 new jobs, falling short of most economists’ expectations and marking the smallest monthly gain since December 2020. The unemployment rate for June was recorded at 3.6%.
Major U.S. Economic Reports
| Report | Period | Actual | Previous |
| S&P “flash” U.S. manufacturing PMI | July | 49.0 | 46.3 |
| S&P “flash” U.S. services PMI | July | 52.4 | 54.4 |
| S&P Case-Shiller home price index (20 cities) | May | -1.7% | -1.7% |
| Consumer confidence | July | 117.0 | 110.1 |
| New home sales | June | 697,000 | 715,000 |
| Initial jobless claims | July 22 | 221,000 | 228,000 |
| Durable-goods orders | June | 4.7% | 2.0% |
| Durable-goods minus transportation | June | 0.6% | 0.7% |
| GDP (advanced report) | Q2 | 2.4% | 2.0% |
| Advanced U.S. trade balance in goods | June | -$87.8B | -$91.9B |
| Advanced retail inventories | June | -0.7% | 0.8% |
| Advanced wholesale inventories | June | -0.3% | 0.0% |
| Pending home sales | June | 0.3% | -2.7% |
| Personal income (nominal) | June | 0.3% | 0.4% |
| Personal spending (nominal) | June | 0.5% | 0.1% |
| PCE index | June | 0.2% | 0.1% |
| Core PCE index | June | 0.2% | 0.3% |
| PCE (year-over-year) | 3.0% | 3.8% | |
| Core PCE (year-over-year) | 4.1% | 4.6% | |
| Employment cost index | Q2 | 1.0% | 1.2% |
| Consumer sentiment (final) | July | 71.6 | 72.6 |
Closing Prices for the Week
| Contract | Close |
|---|---|
| Dow Jones Industrials Average | 35,459.29 |
| Nasdaq Composite | 14,316.66 |
| S&P 500 Index | 4,582.23 |
| CBOE Volatility Index | 13.33 |
| S&P GSCI | 590.93 |
| U.S. Dollar Index | 101.622 |
| 10-Year T-Note (Sep ’23) | 111-110 |
| Crude Oil WTI (Sep ’23) | 80.58 |
| Natural Gas (Sep ’23) | 2.638 |
| Gold (Dec ’23) | 1,999.9 |
| Silver (Sep ’23) | 24.495 |
| Corn (Dec ’23) | 530-2 |
| Wheat (Sep ’23) | 704-2 |
| Soybean (Nov ’23) | 1382-4 |
| Coffee (Sep ’23) | 157.90 |
| Sugar #11 (Oct ’23) | 23.92 |
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