Stocks Jump After Inflation Gauge Cools:
A Friday surge pushed stocks solidly into positive territory last week, ignited by cooling in an inflation gauge closely tracked by the Federal Reserve.
Over the last month, The Dow Jones Industrial Average returned 3.13%, while the S&P 500 returned 2.96%. The Nasdaq Composite Index returned 3.94%.
Source: Charles Schwab & Co, Inc.
Stocks were flat for much of last week amid a batch of new earnings, a 0.25% interest rate hike, and strong economic data. After beginning with gains, stocks lost momentum following the Fed’s expected rate-hike announcement on Wednesday. A bounce on Thursday sparked by a positive mega-cap tech company earnings reversed after bond yields increased.
Stocks recovered strongly Friday on the release of the personal consumption expenditures price index, which fell to its lowest level in two years.1
Much of the market action was related to earnings results. With 44% of S&P 500 companies reporting, 78% have exceeded Wall Street forecasts.2
Expectations of a recession were high coming into 2023. Last week may have erased this recession narrative overhang.
Second-quarter gross domestic product (GDP) data released last week was one big reason why. Economic activity expanded by 2.4%, which was above the forecast of two percent and represented an acceleration from its first quarter GDP of 2.0%. Consumer spending was a major driver of that expansion, rising 1.6%.3
Joining the recession-deferred camp this week was Fed Chair Powell, who stated that the Fed was no longer forecasting a recession.
This Week: Key Economic Data
Source: Bloomberg Finance L.P.
This Week: Companies Reporting Earnings
At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.
Chief Investment Officer
Concord Asset Management
Footnotes and Sources
1CNBC, July 28, 2023
2CNBC, July 27, 2023
3CNBC, July 27, 2023
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