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J. J. Wenrich CFP®

Weekly Market Performance — July 19, 2024

Updated: Jul 24

Markets Blog

David Matzko, LPL Research


Weekly Market Performance for the week of July 15, 2024. Markets experienced turbulence throughout the week, sending major U.S. indexes lower and pressing pause on the most recent rally. Tech names took a break from the spotlight as volatility increased for the S&P 500 amid election uncertainty, a broad market rotation, the first batch of earnings reports, and a global cyber outage. International markets also ended the week lower as U.S. market themes spilled over into global markets. Treasury yields ended little changed over the last five days despite increasing rate cut expectations on Wall Street. The greenback rebounded to snap a two-week losing streak following this week's macro data, including more signals that the U.S. labor market is cooling.


Index Performance


U.S. and International Equities


Markets‍‍: U.S. stocks faced a bumpy ride this week, and it's hard to say which market catalyst was the bigger news. Markets saw a significant rotation carried over from last week, historic political events, a solid batch of earnings, trade angst affecting index heavyweights, and global cyber outages. All three major indexes logged record highs intra-week, however, the Dow was the only major index to post weekly gains, adding 0.65%. The S&P 500 and Nasdaq Composite slumped due to tech losses plus a broad late-week market pullback, ending the week lower by 1.8% and 3.7%, respectively. The Russell 2000 small cap index added 1.8%, though finished well off its best weekly levels, while the Russell 1000 Value Index outperformed its growth counterpart by nearly four percentage points.


U.S. indexes rose to start the week despite big tech names taking a step out of the spotlight. Markets began embracing the so-called "Trump trades" following Saturday's failed assassination attempt on former President Donald Trump. In reaction to this event, Trump's odds of victory increased, leading to solid early-week gains for banks, defense, and traditional energy. Political news dominated headlines again later in the week, amid growing pressure for President Joe Biden to exit the race. The extra pressure came after the White House announced a pause on his campaign events while he recovers from COVID-19 in isolation.


Outside of political events, the major market catalyst this week was the extended rotation away from big tech names and into small caps, value, and cyclicals. Heightened rate-cut hopes were a main factor in fueling the rotation, proving the market can still show some breadth, which has been a key topic this year as indexes have been largely powered by tech enthusiasm. The tech sell-off accelerated on Wednesday as trade angst between the U.S. and China regarding tighter U.S. restrictions on chip sales to China dampened sector sentiment. Additionally, the VIX index, a measure of implied volatility of the S&P 500, surged, reaching its highest levels since May. Earnings season entering full swing was also in play, as banks and other financial companies dominated reports. Broadly speaking, reports mostly beat earnings estimates, however price action after reporting was mixed.


Turning to international markets, Europe ended lower Friday to seal weekly losses as markets were weighed down by CrowdStrike's (CRWD) global outages, which affected airlines, financial services, and media companies worldwide. The STOXX 600 index closed 2.7% lower in a busy week of macro data releases. Bank of England (BOE) rate-cut hopes and equities fell as U.K. Consumer Price Index (CPI) and Producers Price Index (PPI) data were hotter than expected, although unchanged from May. Further downward pressure was placed on equities as Eurozone CPI data was 0.1% above preliminary readings. European markets did not experience as large of a tech sell-off as the U.S. and Asia, as the European Central Bank (ECB) decision to hold rates unchanged, as expected, overshadowed weak tech performance. Asian markets seemed to follow Wall Street's path, as tech pulled Japan, Taiwan, and South Korea into negative territory in Asia's worst week in three months. Taiwan Semiconductor Company (TSMC) crushed earnings estimates on Thursday, and briefly sparked a global tech rally, however, the boost fizzled by midday. Markets also kept the People's Bank of China (PBOC) decision in view, as the central bank held rates steady as well. China ended the week higher on the back of the PBOC decision and ongoing state-funded buying, despite lower-than-expected second quarter GDP dragged down by the property market and consumption. The Hang Seng ended the week lower amid disappointing macro data and the lack of market-supporting news from the Chinese Communist Party's (CCP) Third Plenum meeting.


Fixed Income‍‍: The Bloomberg U.S. Aggregate Index ended the week slightly lower as Treasury yields were little changed over the last five days. The 10-year yield was virtually unchanged, and the monetary policy-sensitive 2-year yield was higher by three basis points. Last weekend's assassination attempt on Donald Trump, which served to improve his election odds, reinvigorated the “Trump trade” by pushing yields higher and steepening the Treasury yield curve. Yields continued to retreat midweek, as the 10-year reached a four-month low on Tuesday. Midweek yield declines came in reaction to boosted rate-cut hopes after Federal Reserve (Fed) Chair Jerome Powell's dovish comments outweighed Tuesday morning's stronger-than-expected retail sales data. However, weekly gains were erased on Thursday and Friday, as yields rose and the yield curve saw further steepening following Thursday’s jobless claims data signaling that the labor market is continuing to cool. Yields ticked higher on Friday as Treasuries went into waiting mode ahead of next week's gross domestic product (GDP) and personal consumption expenditures (PCE) data. Additionally, the Bloomberg U.S. Investment Grade (IG) Corporate bond index edged lower this week.


Commodities‍‍: The Bloomberg Commodities Index ended lower this week by nearly 3.2%. West Texas Intermediate (WTI) crude saw significant swings throughout the week, shedding 1.4% on Tuesday and climbing 2.6% on Wednesday. On the week, WTI retreated by almost 2.4%, driven in part by lingering Chinese demand concerns and a strengthening dollar, ahead of the upcoming U.S. inventory report. Over the last three weeks, U.S. crude oil inventories have fallen sharply and are now lower than average for this time this year. The U.S. dollar index bounced back on recent economic data releases, marching 0.3% higher and snapping two consecutive weeks of declines. Forex headlines were still focused on the Japanese yen which strengthened slightly and continued to experience elevated volatility this week. Markets eyed possible Japanese government intervention on Wednesday as the currency surged; however, the rally was cut short as traders unwound carry trades on Thursday. Gold futures touched record highs intraweek, but declined nearly 0.9% on the week due to the greenback's advance and likely some profit-taking by investors. Silver futures slipped after the CCP's Third Plenum meeting disappointed investors who were hoping for new stimulus measures. Copper futures also declined. The Bloomberg Grains Index declined 2.1% and the Bloomberg soft commodity index fell 3.2% on the week.


Economic Weekly Roundup


Unchanged Retail Sales. June retail sales were roughly unchanged month-over-month as consumers spent significantly less on gas and auto sales. Auto sales were down -2.3% on the month as dealers scrambled to make up for a major software blackout, most likely due to targeted cyber attacks. Restaurant spending continued to decelerate, a sign that consumers are starting to ease up on their spending habits. Sales at sporting goods stores and other hobby stores declined for the third time in four months as consumers pulled back on discretionary spending. However, retail activity at warehouse clubs and superstores trudged higher, supporting retailers’ sales goals.


Consumers are pulling back on some items, but they still show signs of resilience. Investors will get a better picture of the consumer in the upcoming personal income and spending release later this month. So far, those consumers who experienced strong real income growth continue to support the economy with their insatiable appetite to spend.


Claims Rebounded. Unemployment claims increased last week to 243,000, intimating a further softening in the job market. This report is within the reference period for the nonfarm payroll report, which is the pay period including the 12th, making this week’s data especially important for markets. Initial claims rose by 20,000, the largest weekly change since May 4. Continuing claims (week of July 6) also rose and are now the highest since November 2021 and higher than before the pandemic.


Rising claims imply the labor market is cooling at a measured pace. We expect the upcoming payroll report for July to be a bit softer than the previous month. We learned from the recent Beige Book that businesses are not filling open positions as aggressively as they were in previous months. We should expect more cautionary rhetoric from Fed policy makers about the labor market.


The Week Ahead


The following economic data is slated for the week ahead:

  • Monday:  Chicago Fed National Activity Index (June) 

  • Tuesday:  Philadelphia Fed Non-Manufacturing Activity (July), Richmond Fed Manufacturing Index (July), Richmond Fed Business Conditions (July), Existing Home Sales (June) 

  • Wednesday: MBA Mortgage Applications (July 19), Wholesale Inventories (June preliminary), Advance Goods Trade Balance (June), Retail Inventories (June), S&P Global U.S. Manufacturing PMI (July preliminary), S&P Global U.S. Services PMI (July preliminary), S&P Global U.S. Composite PMI (July preliminary), New Home Sales (June) 

  • Thursday: GDP Annualized (Q2), Personal Consumption (Q2), GDP Price Index (Q2), Core PCE Price Index (Q2), Initial Jobless Claims (July 20), Continuing Claims (July 13), Durable Goods Orders (June preliminary), Durables ex Transportation (June preliminary), Capital Goods Orders Nondefense ex Aircraft (June preliminary), Cap Goods Shipments Nondefense ex Aircraft (June preliminary), Kansas City Fed Manufacturing Activity (July) 

  • Friday:  Personal Income (June), Personal Spending (June), Real Personal Spending (June), PCE Price Index (June), Core PCE (June), University of Michigan Sentiment & Expectations Report (July final), Kansas City Fed Services Activity (July)








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