Market Update for week 33
Market Recap |
Week of Aug. 12 through Aug. 16, 2024 |
|
The S&P 500 logged a 3.9% weekly gain after encouraging inflation reports and strong macro data boosted bets for a September interest-rate cut and helped ease recession concerns. The benchmark equity index ended Friday's session at 5,554.25, up from last week's close of 5,344.16 and marking its first gain following four consecutive weekly declines. All sectors closed higher for the week, led by technology's 7.5% jump and consumer discretionary's 5.2% gain. The pace of consumer inflation unexpectedly slowed last month, posting the smallest increase since March 2021, while producer prices grew less than Wall Street's projections. Markets are now pricing in a roughly 75% probability that the Federal Reserve will cut interest rates by 25 basis points next month, up from 49% a week ago, according to the CME FedWatch tool. The remaining odds are in the favor of a more aggressive 50-basis-point reduction. Other key economic data released during the week showed that retail sales rose more than projected in July, while weekly applications for unemployment insurance unexpectedly fell, helping ease concerns regarding an economic downturn. The tech sector's jump was aided by an 8.8% gain in Applied Materials (AMAT), which reported stronger-than-expected fiscal Q3 results amid growing artificial intelligence adoption. AI darling Nvidia (NVDA) surged almost 19% for the week. A 26% boost in Starbucks (SBUX) helped push consumer discretionary higher for the week. The coffee giant has poached Chipotle Mexican Grill (CMG) Chief Executive Brian Niccol for the top role starting next month. Chipotle fell 5.5%. Ulta Beauty (ULTA) surged 17% after a filing showed Berkshire Hathaway (BRK.A, BRK.B) acquired a stake in the beauty retailer in Q2. Consumer staples rose 1.6% amid an 8.1% gain in Walmart (WMT). The retail giant raised its full-year outlook following a quarterly beat. Kellanova (K) rose 7.2% for the week after agreeing to be acquired by confectionery and pet food company Mars in an all-cash deal worth $35.9 billion. Financials posted a 3.2% weekly gain, led by KeyCorp's (KEY) 12% increase. KeyCorp secured a $2.8 billion investment from Bank of Nova Scotia (BNS) in return for a minority stake in the US bank. Health care rose 1.9%, helped in part by a 9.1% growth in Cardinal Health (CAH), which raised its full-year earnings outlook after posting better-than-projected quarterly results. The Biden administration on Thursday released prices for 10 prescription drugs that were selected for negotiations between the Medicare program and drugmakers. Industrials moved 2.1% higher for the week, aided by a 9.2% rise in Deere (DE), which delivered a fiscal Q3 beat.
Bond UpdateThe only opinion that matters is the opinion of the market because that determines your price, whether buying or selling, and today, we look at what the bond market is saying. Any story that you or I want to make from them is simply narrative. The bond market appears to be signaling all clear, but we know that can change quickly. Warning: jargon ahead. The 10-Year Treasury is the most watched product in the bond market. The BondBloxx Bloomberg 10-Year Target Duration U.S. Treasury ETF (XTEN) is trading near its highs and above the steadily rising 50-day moving average. The iShares iBoxx Investment Grade Corporate Bond ETF (LQD) has been making upside progress as it fights to claw back the disastrous 2022 losses. The trend is bullish, above the rising 50-day moving average. The SPDR Bloomberg HY Bond Fund (JNK) is trading at record highs above the rising 50-day moving average. It is hard to make a case for rate cuts when the riskier parts of the market are trading at their highs and barely registered a blip during recent market volatility. The relationship between Short-Term TIPS (Treasury Inflation Protected Securities) and Aggregate Bonds (STIP vs. AGG) points to expectations that inflation is no longer a concern. The ratio is well off the highs and trades below the declining 50-day moving average. What does all this mean? The bond market is unified in its signaling. Prices are going up steadily across Treasuries, Corporate bonds, High-yield bonds, and declining for TIPS. This means lower rates are coming, and inflation is finished for the foreseeable future.
Up NextNext week's major earnings include Intuit (INTU), TJX (TJX), Target (TGT), Palo Alto Networks (PANW), Estee Lauder (EL), Lowe's (LOW), Analog Devices (ADI) and Dollar Tree (DLTR). Minutes from the Federal Open Market Committee's July meeting are scheduled to be released Wednesday, with data on new and existing home sales for last month also on the deck for next week.
All the Best, Gordon Achtermann, CSRIC®, CFP®
703-573-7325 Your Best Path Financial Planning delivers comprehensive planning and investment management to families and individuals, whether you live in Fairfax, Virginia, Northern Virginia, or nationwide. |
