Last Week’s Summary
- S&P 500 Index rose 1.03%
- International Equities rose 1.39%
- Emerging Markets rose 2.85%
- U.S. 10-Year Treasury Yield rose to 3.95%
- FOMC hiked rates 25 basis points
- Initial Jobless Claims fell to 221k
- Q2 2023 GDP rose to 2.4% YoY
What to Watch for This Week
- M, 7/31/23 MNI Chicago PMI
- T, 8/1/23 S&P Global US Manufacturing PMI
- W, 8/2/23 ADP Employment Change
- Th, 8/3/23 Initial Jobless Claims, Factory Orders
- F, 8/4/23 Change in Nonfarm Payrolls, Unemployment Rate
Weekly Market Recap
Mega caps spearheaded gains in the equities market, driving the S&P 500 Index up 1% and marking its third consecutive weekly advance. The large-cap equity index is now within 2% of its all-time high from 2022. One of the big drivers in market activity this week was the Federal Reserve’s decision to reignite their rate hike cycle, implementing a 25-basis point rate hike and bringing rates to their highest levels in 22 years.
While the Fed remains data-dependent, investors are anticipating the possibility of one last rate hike. Two-Year Treasury Yields, which are highly sensitive to changes in monetary policy, dropped five basis points to 4.87%. Fed Chair Jerome Powell said his staff had ditched the recession forecast it put in place in March, when banking turmoil had raised fears about a potential credit crunch.
The likelihood of the Federal Reserve effectively managing inflation without encountering a recession seems promising. In the second quarter, U.S. GDP gained momentum, indicating a resilient economy. Additionally, the easing of the Personal Consumption Expenditure Deflator Index, the Fed’s preferred measure of inflation, to 3% adds to the positive outlook.
International equities gained as the European Central Bank raised interest rates by another quarter-point, and President Christine Lagarde expressed an “open mind” on future actions. The Bank of Japan’s discussions on letting its 10-Year Yield rise beyond its 0.5% cap affected markets, leading to fluctuations in rates and stock performances.
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