Last Week’s Summary
- S&P 500 Index rose 2.44%
- International Equities rose 4.77%
- Emerging Markets rose 4.96%
- U.S. 10-Year Treasury Yield fell to 3.83%
- Initial Jobless Claims fell to 237k
- CPI fell to 3.0%; CPI Core fell to 4.8%
- PPI fell to 0.1%; PPI Core fell to 2.6%
What to Watch for This Week
- M, 7/17/23 Empire Manufacturing
- W, 7/19/23 MBA Mortgage Applications, Housing Starts
- Th, 7/20/23 Initial Jobless Claims, Existing Home Sales
- F, 7/21/23 Bloomberg July United States Economic Survey
Weekly Market Recap
The U.S. stock markets had a strong rally this week as the Consumer Price Index (CPI), a widely-used measure of inflation, reached its lowest level since 2021, declining to 3%. This decrease in inflationary pressures has eased global market concerns about further increases in U.S. interest rates and has validated the effectiveness of the Federal Reserve’s restrictive monetary policy, which takes time to show its impact.
Market sentiment suggests that there may be only one more rate hike, likely to occur within the next two meetings, before the Federal Reserve reaches its terminal rate. Despite the lower inflation figures, the job market remains robust, and traders have been convinced that labor conditions can remain resilient under the current restrictive measures imposed by the Fed. In an unexpected twist, the University of Michigan released its monthly Consumer Sentiment report, which measures the public’s sentiment about the economy.
The report exceeded market expectations and nearly reached its two-year high, indicating a positive outlook among the general public toward the current economic situation. The earnings season has begun on a positive note as large banks reported their earnings this week.
Companies like JPMorgan Chase & Co., Wells Fargo & Co., and Citigroup Inc. have surpassed analyst estimates, which bodes well for the economy. This outcome is particularly encouraging considering concerns over the health of financial institutions due to the central bank’s tightened monetary policy.
