Market Update

All major U.S. equity markets finished the week higher on improving inflation data and a boost to big bank performance. The Consumer Price Index (CPI), the Federal Reserve’s “actual” inflation gauge, for June came in at 3%. This is a far cry from June 2022’s 9.1%. Core CPI, which is different from headline CPI (mentioned previously), remains high at 4.8% and the Fed is intent on returning both core and headline inflation to 2%. Big banks released earnings this week and posted outstanding numbers. JP Morgan posted record revenue in the second quarter of $41.3 billion. Blackrock, the world’s second largest asset manager, reported assets climbed $9.4 trillion during the second quarer. The earnings release fostered confidence in a banking system which recently faced turmoil amidst mid-tier bank failures. The combination of an improving inflation and positive big bank performance sent equity markets soaring.

All major U.S. equity markets finished the week lower following strong jobs data. Robust labor reports released two significant data points: nearly half a million jobs were added in the month of June (ADP) and job cuts reached an eight-month low. When more individuals are working it means those individuals have money to spend, and they do just that. Increases to consumer spending can cause prices to rise, also known as inflation. And how does the Federal Reserve combat inflation? By raising the federal funds rate.. Increases to federal funds rate causes increases to Treasury yields. When the yields on Treasuries jump higher, investors exit the stock market and enter the bond market in efforts to lock in higher yields. This is what we saw last week and is the reason why equity markets dropped.

All U.S. domestic equity markets finished the week higher. Consumer confidence hit the highest level since the beginning of 2022. When consumers are confident, we spend which boosts the economy and the markets. Durable goods orders exceeded expectations which shows a rebound in manufacturing activity. If manufacturing increases workers will be needed which should add a boost to the labor market. Additionally, the 23 largest lenders passed the Federal Reserves stress test this week. The stress test serves as a way to determine how much capital banks need to set aside during times of trouble. During its test, all top lenders were able to withstand what the Fed refers to as a severe global recession and dips in the housing market. Ultimately, this displayed resiliency among the banks and boosted stock markets.

The major U.S. equity markets finished the week lower following the Fed chief’s testimony and a continued housing supply shortage. Jerome Powell said policymakers anticipate further rate hikes in order to address U.S. economic growth and inflationary pressures. Powell stated that the speed of rate hikes is no longer an issue and the Fed is considering gradual rate increases moving forward. Equity markets want to see the end of the rate hike cycle and the Fed chair’s comments failed to provide the end stocks were seeking. In addition, the U.S. is experiencing a housing supply shortage which continues to prop up home prices. Housing is the largest component of inflation so it’s difficult for the Fed to rid inflation if elevated home prices persist. The combination of these factors, amongst other, sparked a sell off this week.

The major U.S. equity markets finished the week higher. The Federal Reserve paused interest rate hikes for the first time in nearly a year and half. Though central bank officials struck a hawkish (inclined to raise rates) tone following the pause, investors regained confidence and stock markets rallied. The Fed’s actual inflation gauge, the Consumer Price Index (CPI), came in at 4% for May. The number is still high but it is much better than June 2022’s 9.1% figure. Some metrics, such as core inflation, remain tricky to tackle. With that said, the numbers are heading in the right direction, and the central bank affirmed this notion by pressing pause on rate hikes. 

All major U.S. equity markets finished higher as anticipation grows over a rate-hike pause from the Federal Reserve. The Fed is currently in a media blackout ahead of its July 13-14 policy meeting. Though nothing is guaranteed, over the past 40 years stock markets have performed well on average following a conclusion to rate increases. Currently, seven stocks are driving S&P 500 growth – Apple is one of them. Apple introduced its new vitrual reality called Apple Vision Pro. It’s a personal display worn on the face that incorporates Apple elements and a unique operating system. The combination of expected rate-hike pauses and a new product launch from a driver of the S&P 500 sparked markets.

All major U.S. equity markets finished the week higher as Congress passes a U.S. debt deal. The House of Representatives passed the bill aiming to limit government spending until the 2024 election and prevent a potential U.S. default. The Senate approved the bill to suspend the nation’s debt ceiling on Friday.  A default could have had severe economic consequences as the U.S. credit rating would have been called into question. The fact that we avoided this scenario added stability to the markets. Pivotal payroll numbers released on Friday pointed toward more job openings and an increased number of individuals added to payrolls. The level of job growth the economy is experiencing at this stage in a recovery is almost unheard of. The combination of jobs and debt-deals sent markets soaring. 

◦ Dow Jones Industrial Average   -0.9% ◦ S&P 500   +0.3% ◦ Russell 2000   -0.3% ◦ NASDAQ   +3.6% Domestic equity markets finished the week mixed as investors anxiously awaited results from the Federal Reserve’s preferred inflation gauge, Personal Consumption Expenditures (PCE). Stocks performed well when considering inflation (as measured by PCE) came in hotter than the prior month. The Fed uses this data point to determine whether or not inflation is returning to its 2% goal. Additionally, former Fed chair Ben Bernanke publicly stated the labor market presents an ongoing issue due to the fact nearly two jobs exist for every one unemployed individual. It means employers must raise wages to attract workers – further propping up pricing pressures. Lastly, debt-ceiling drama remains unresolved and rating agencies are threatening to downgrade the U.S.’s credit rating. Stocks proved resilient this week in the face of challenging economic news.

All major domestic equity markets, aside from the tech-heavy NASDAQ, finished lower. The Federal Reserve reported tighter lending standards and continued decline in loan demand. In other words, fewer dollars are in circulation resulting in decreased consumer spending – on which our economy relies. The recent regional banking woes further incentivized banks to tighten credit access. U.S. Small Business Confidence fell this week on worries that economic conditions will not improve. Businesses are still reporting a shortage in workers meaning wage inflation may have room to grow. Monthly inflation numbers increased while annual inflation numbers eased, though not as much as analysts would like. Multiple key data points hit this week and few painted a clear picture of economic improvement, so equity markets dropped.

U.S. equity markets finished the week lower following the 10th consecutive rate hike from the Federal Reserve. The rate hike caused turmoil in the banking sector which led to one regional bank tumbling as much as 50% in a single day. Drops in the banking sector sparked recessionary fears and triggered selling across stock markets. Fortunately, other sectors of the market proved more resilient. Also contributing to equity declines was the fact that April jobs report showed stronger than expected job gains and an avergage hourly earnings increase. Both data points from the jobs report point toward higher income which the markets perceive as higher consumer spending and ultimately, higher inflation. The jobs report and the rate hike were large contributors to last week’s market declines.