Market Update for the Week of July 15, 2024

Posted on July 18, 2024 by Neal Gallagher

Presented by Mark Gallagher

Small-cap stocks posted a major rally as potential interest rate cuts offered relief amid recent struggles. Short-term Treasuries rallied on the lower Consumer Price Index (CPI) report as investors locked in elevated short-term rates.

Quick Hits

Report releases: Consumer prices were softer than expected in June; producer prices surprised to the upside.
Financial market data: Small-cap stocks posted a major rally as potential interest rate cuts offered relief.
Looking ahead: This week, data will focus on retail sales, housing, and industrial production.

Keep reading for an in-depth look.

Report Releases—July 8–12, 2024

National Federation of Independent Business Optimism Index: June (Tuesday)

Small business optimism rose to 91.5, exceeding last month’s level of 90.3 and expectations of 90.5.

Consumer Price Index (CPI): June (Wednesday)

Consumer inflation slowed on a monthly and year-over-year basis in June. Year-over-year, core consumer inflation fell to its lowest level in more than three years and headline price growth matched a three-year low.

-Prior monthly CPI/core CPI growth: +0.0%/+0.2%

-Expected monthly CPI/core CPI growth: +0.1%/+0.2%

-Actual monthly CPI/core CPI growth: –0.1%/+0.1%

-Prior year-over-year CPI/core CPI growth: +3.3%/+3.4%

-Expected year-over-year CPI/core CPI growth: +3.1%/+3.4%

-Actual year-over-year CPI/core CPI growth: +3.0%/+3.3%

Producer Price Index (PPI): June (Friday)
Producer prices increased more than expected in June, with headline and core price growth exceeding economist estimates.

-Prior monthly PPI/core PPI growth: +0.0%/+0.3%

-Expected monthly PPI/core PPI growth: +0.1%/+0.2%

-Actual monthly PPI/core PPI growth: +0.2%/+0.4%

-Prior year-over-year PPI/core PPI growth: +2.4%/+2.6%

-Expected year-over-year PPI/core PPI growth: +2.3%/+2.5%

-Actual year-over-year PPI/core PPI growth: +2.6%/+3.0%

Preliminary University of Michigan Consumer Sentiment Survey: July (Friday)

Consumer sentiment unexpectedly fell to start July, with worsening consumer views on current economic conditions and future expectations weighing on sentiment.

The Takeaway

-Small business confidence surprised to the upside; consumer confidence missed expectations.

-Consumer prices were softer than expected in June, but producer prices surprised to the upside.

Financial Market Data

Equity

Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	0.89%	2.88%	18.61%	27.46%
Nasdaq Composite	0.25%	3.77%	23.04%	33.20%
DJIA	1.61%	2.32%	7.22%	18.86%
MSCI EAFE	2.29%	4.50%	10.08%	15.34%
MSCI Emerging Markets	1.82%	3.78%	11.55%	14.59%
Russell 2000	6.01%	4.95%	6.76%	12.80%

Source: Bloomberg, as of July 12, 2024

The Russell 2000 led the way last week, gaining more than 6 percent. Softer-than-expected CPI data led to a major rally in small-caps. Softer inflation data supports the likelihood that the Federal Reserve (Fed) will cut interest rates in June. That might start the cycle of easing, which would offer solace to small-cap firms that have struggled with variable rate debt exposure.

Fixed Income

Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	1.54%	0.82%	4.19%
U.S. Treasury	1.32%	0.44%	2.97%
U.S. Mortgages	1.78%	0.78%	3.77%
Municipal Bond	0.59%	0.18%	3.96%

Source: Bloomberg, as of July 12, 2024

The yield curve saw an inversion on the back of the softer-than-expected CPI report. Short-term yields dropped sharply as investors locked in elevated rates with the potential for a Fed rate cut increasing. The back end of the curve fell to a lesser extent as investors locked in shorter-term Treasuries. The 2-year yield fell 14 basis points (bps) to close at 4.46 percent and the 30-year fell 7 bps to 4.4 percent.

The Takeaway

-Small-caps posted a major rally as potential rate cuts offered relief amid recent struggles.

-Short-term Treasuries rallied on the lower CPI report as investors locked in elevated short-term rates.

Looking Ahead

This week, we expect data on retail sales, housing, and industrial production.

-The week kicks off on Tuesday with the release of retail sales for June and the National Association of Home Builders Housing Market Index for July. Retail sales are expected to fall after increasing modestly in May. Home builder confidence is expected to remain unchanged after falling more than expected in June.

-Wednesday will also be a busy day, with the release of housing starts, building permits, and industrial production for June. Housing starts are expected to rise and permits are set to fall modestly. Economists expect to see a solid increase in industrial production, driven in part by rising capacity utilization.

Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000^® Index measures the performance of the 2,000 smallest companies in the Russell 3000^® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com

Authored by the Investment Research team at Commonwealth Financial Network.

Market Update for the Week of July 8, 2024

Posted on July 8, 2024 by Neal Gallagher

Presented by Mark Gallagher

Tesla was the story of last week; it rose more than 27 percent after second-quarter delivery estimates were better than expected. Treasuries rallied slightly after minutes from the most recent Federal Reserve (Fed) meeting noted progress on inflation, indicating a rate cut could be in the not-too-distant future.

Quick Hits

Report releases: The Fed reiterated its data dependence in minutes from its most recent meeting.
Financial market data: Tesla fueled the rally in mega-cap names on better-than-expected second-quarter deliveries.
Looking ahead: The focus this week will be on inflation; consumer and producer price data for June is expected to be released.

Keep reading for an in-depth look.

Report Releases—July 1–5, 2024

ISM Manufacturing Index: June (Monday)

The ISM Manufacturing index was weaker than expected, marking the third consecutive month of declines and the 19th decline in the past 20 months.

-Expected/prior month ISM Manufacturing index: 49.1/48.7

-Actual ISM Manufacturing index: 48.5

International Trade Balance: May (Wednesday)

The international trade deficit increased 0.8 percent to $75.1 billion. Exports fell 0.7 percent, leading the expansion of the deficit.

Federal Open Market Committee (FOMC) Meeting Minutes: June (Wednesday)

In minutes from the FOMC’s June meeting, the Fed acknowledged recent progress on inflation and stressed that it will remain data dependent as it tries to balance the evolving economic outlook and risks. Fed Chair Jerome Powell echoed this in recent commentary, suggesting that the central bank wants to see additional inflation data before adding to the confidence for a cut.

Employment Report: June (Friday)
The employment report for June was slightly higher than expected, beating estimates of 200,000 jobs added by 6,000. Hourly wages fell 0.2 percent to 3.9 percent year-over-year, in line with expectations. The unemployment rate ticked up to 4.1 percent.

-Expected/prior month jobs added: 200,000/218,000

-Actual jobs added: 206,000

The Takeaway

-Manufacturing confidence remains subdued, and exports fell 0.7 percent in May.

-The June employment report was in line with expectations; the Fed remains data dependent as it moves toward a potential interest rate cut in early fall.

Financial Market Data

Equity

Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	1.98%	1.98%	17.57%	27.10%
Nasdaq Composite	3.51%	3.51%	22.73%	34.10%
DJIA	0.69%	0.69%	5.52%	17.20%
MSCI EAFE	2.16%	2.16%	7.62%	14.51%
MSCI Emerging Markets	1.92%	1.92%	9.55%	13.25%
Russell 2000	–1.01%	–1.01%	0.71%	9.86%

Source: Bloomberg, as of July 5, 2024

Large-cap equities rallied in the holiday-shortened week. The Nasdaq led the way, rising for the fifth consecutive week. Tesla increased more than 27 percent as the company’s second-quarter deliveries were better than expected. Tesla deliveries fell 4.8 percent in the second quarter, but that represented a quarter-over-quarter rebound of 14.8 percent.

Fixed Income

Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	0.71%	0.00%	3.99%
U.S. Treasury	0.59%	–0.28%	2.73%
U.S. Mortgages	0.73%	–0.25%	3.59%
Municipal Bond	0.06%	–0.34%	3.25%

Source: Bloomberg, as of July 5, 2024

Treasuries also rallied on the potential for future rate cuts. The 10-year yield fell 7 basis points (bps), closing at 4.27 percent. The rally in 30-year Treasuries was a bit more muted; yields fell just 3 bps, closing at 4.47 percent.

The Takeaway

-Tesla fueled the rally in mega-cap names on better-than-expected second-quarter deliveries.

-Treasuries rallied on the back of Fed minutes and the belief that we may be closer to an interest rate cut in September.

Looking Ahead

The focus this week will be on inflation with the release of the Consumer Price Index (CPI) and Producer Price Index (PPI) for June.

-The week kicks off Monday with the release of consumer credit data for May. Consumer credit, which can be volatile month-over-month, is expected to increase from $6.4 billion in April to $8 billion.

-On Tuesday, we anticipate the release of the National Federation of Independent Business (NFIB) Small Business Optimism Index for June. The index reached its lowest level since 2012 in March, falling to 88.5 before improving to 90.5 in May. It’s expected to decline slightly to 90.3.

-Thursday will be the highlight of the week with the release of the CPI for June. It’s expected to decline to 3.1 percent year-over-year, down from 3.3 percent in May. Core CPI, which excludes food and energy, is expected to remain flat at 3.4 percent year-over-year.

-Finally, on Friday, we expect the PPI for June. It’s expected to rise 0.1 percent month-over-month after dipping 0.2 percent in May.

Authored by the Investment Research team at Commonwealth Financial Network.

Market Update for the Week of July 1, 2024

Posted on July 2, 2024 by Neal Gallagher

Presented by Mark Gallagher,

Nike (NKE) was the story of the week: it was down more than 20 percent, as it missed sales estimates. The back end of the yield curve sold off again as investors question what the recent economic slowdown means for longer-term growth.

Quick Hits

Report releases: Personal spending increased for the 14th consecutive month in May.
Financial market data: Nike (NKE) stock was down by more than 20 percent, as it missed
sales estimates.
Looking ahead: We expect many releases this week, despite the holiday, including the Federal Open Market Committee (FOMC) Minutes and the Employment Report.

Report Releases—June 24–28, 2024

Conference Board Consumer Confidence, June (Tuesday)

Consumer confidence fell modestly in June due to worsening consumer expectations for
future conditions.

-Expected/prior month consumer confidence: 100.0/101.3

-Actual consumer confidence: 100.4

Fed Region-Specific Manufacturing and Services Data, June

Texas factory activity was flat in June. Manufacturing conditions inched up to 0.7% from –2.8% in May. The Philadelphia Non-Manufacturing survey showed an increase from 7.3% in May to 15.1% in June. Richmond showed decline in its manufacturing index from 0 in May to –10% in June.

Durable Goods Orders, May (Thursday)

Surprisingly, durable goods orders increased in May, though core orders were down.

-Expected/prior month durable goods orders: –0.5%/+0.2%

-Actual durable goods orders: +0.1%

Personal Income and Spending Report, May (Friday)
Personal income and spending growth both accelerated in May. This marks 14 consecutive months with positive spending growth.

-Expected/prior personal income monthly change: +0.4%/+0.3%

-Actual personal income change: +0.5%

-Expected/prior personal spending monthly change: +0.3%/+0.1%

-Actual personal spending change: +0.2%

The Takeaway

-Data came in mixed, as consumer confidence came in higher than expected, but personal spending missed expectations.

-Durable goods orders beat expectations, but core orders declined.

Financial Market Data

Equity

Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	–0.06%	3.59%	15.29%	26.67%
Nasdaq Composite	0.26%	6.03%	18.57%	31.49%
DJIA	–0.08%	1.23%	4.79%	17.92%
MSCI EAFE	0.36%	–1.61%	5.34%	12.53%
MSCI Emerging Markets	0.06%	3.94%	7.49%	12.40%
Russell 2000	1.33%	-0.93%	1.73%	11.90%

Source: Bloomberg, as of June 28, 2024

Despite a relatively tepid week in equities there were some larger moves below the surface. Nike (NKE) and Walgreens were both down by more than 20 percent. Nike reported a sales miss, as increased competition and China remain pain points. Both Nike and Walgreens Boots Alliance (WBA) cut guidance. Rivian (RIVN) was up 30 percent on the week, as Volkswagen announced it would invest up to $5 billion in the EV startup. Cruise lines, software, regional banks, and trucking also caught a bounce, as these industries have been under pressure lately on fears of higher for longer rates from the Federal
Reserve (Fed).

Fixed Income

Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	0.95%	–0.71%	2.13%
U.S. Treasury	1.01%	–0.86%	1.00%
U.S. Mortgages	1.63%	–0.98%	1.39%
Municipal Bond	1.53%	–0.40%	3.06%

Source: Bloomberg, as of June 28, 2024

The yield curve saw modest moves higher on the back end of the curve. The U.S. 10-year yield rose 9 basis points (bps) to close the week at 4.34. The 30-year closed the week at 4.50, up 10 bps on the week. The Core Personal Consumption Expenditure (PCE) Price Index or Core PCE coming in as expected did little to surprise investors and leads to a likely September rate cut.

The Takeaway

-Nvidia was down more than 2 percent again this week, though the broader Nasdaq Index finished positive.

-Long Treasuries sold off yet again, as the U.S. economy and inflation gradually slow.

Looking Ahead

Despite the July 4th holiday, we expect to see many data releases this week. Highlights will include Institute for Supply Management (ISM) data, the International Trade Balance, FOMC Meeting Minutes from June, and the Employment Report for June.

-The week kicks off on Monday with the release of the ISM Manufacturing Survey for June. We expect to see manufacturer confidence improve modestly, after falling by more than expected in May. On Wednesday we expect the release of the ISM Services survey for June. Service sector confidence is expected to fall in June after improving by more than expected in May.

-Wednesday will also see the release of the International Trade Balance for May and the FOMC Meeting Minutes for June. The trade deficit is set to increase in May due in part to a widening trade gap in the trade of goods during the month. The minutes from the Fed’s most recent FOMC meeting are set to be released on Wednesday as well, which will give economists and investors further insight into the Fed’s deliberations at this meeting.

-Finally, Friday will wrap with the Employment Report for June. Hiring is expected to slow after surging past expectations in May. Slowing job growth would likely be seen by markets and the Fed as a positive development, if estimates hold.

Authored by the Investment Research team at Commonwealth Financial Network.

Market Update for Week of June 24, 2024

Posted on June 24, 2024 by Neal Gallagher

Presented by Mark Gallagher

Nvidia was down last week despite a strong rally in which it briefly became the largest stock by market capitalization. Its move lower dragged growth and technology stocks down. Treasuries sold off in unison across the curve.

Quick Hits

Report releases: Housing starts and existing home sales slowed in May, signaling a cooling housing market.
Financial market data: Nvidia fell, dragging growth stocks with it.
Looking ahead: This week will focus on consumer confidence and business sentiment.

Keep reading for an in-depth look.

Report Releases—June 17–21, 2024

Retail Sales: May (Tuesday)

Retail sales came in below economist estimates after falling modestly in April.

-Expected/prior month retail sales monthly change: +0.3%/–0.2%

-Actual retail sales monthly change: +0.1%

Industrial Production: May (Tuesday)

Industrial production surged, driven by rising manufacturing production and capacity utilization.

-Expected/prior month production change: +0.3%/+0%

-Actual production change: +0.9%

National Association of Home Builders Housing Market Index: June (Wednesday)

Home builder sentiment fell to its lowest point this year as high mortgage rates and prices weighed on prospective homebuyers.

-Expected/prior month sentiment: 46/45

-Actual sentiment: 43

Existing Home Sales: May (Friday)
The pace of existing home sales slowed, marking three consecutive months with slowing sales growth.

-Expected/prior month existing home sales change: –1%/–1.9%

-Actual existing home sales change: –0.7%

The Takeaway

-Data was mixed last week, with softer retail sales and strong manufacturing production.

-The housing market also saw mixed data, with June sentiment turning sour but home sales faring better than expected.

Financial Market Data

Equity

Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	0.63%	3.65%	15.36%	27.08%
Nasdaq Composite	0.01%	5.76%	18.26%	32.02%
DJIA	1.50%	1.31%	4.87%	17.68%
MSCI EAFE	0.07%	–1.96%	4.97%	10.83%
MSCI Emerging Markets	0.98%	3.88%	7.42%	11.06%
Russell 2000	0.80%	–2.22%	0.40%	10.19%

Source: Bloomberg, as of June 21, 2024

Value stocks outperformed growth. Nvidia became the largest stock in the world by market capitalization, briefly passing Microsoft before relinquishing the top spot later in the week. This drove down growth stocks, whereas consumer discretionary, energy, and financials were among the top performing sectors. Utilities, technology, and real estate fared worst as home sales continued to soften.

Fixed Income

Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	1.60%	–0.07%	2.89%
U.S. Treasury	1.57%	–0.31%	1.58%
U.S. Mortgages	2.07%	–0.10%	2.47%
Municipal Bond	1.76%	–0.18%	3.53%

Source: Bloomberg, as of June 21, 2024

The Treasury yield curve was little moved, with a relatively parallel shift higher. The 2-year rose 4.5 basis points (bps) to close the week at 4.73 percent, the 10-year grew 5 bps to 4.26 percent, and the 30-year increased 5 bps to 4.4 percent.

The Takeaway

-Given its size, Nvidia is worth watching for a potential rotation away from artificial intelligence names.

-Treasuries sold off slightly.

Looking Ahead

This week will focus on consumer confidence and business sentiment. Highlights include data on consumer confidence, durable goods orders, and personal income and spending.

-The week kicks off on Tuesday with the release of the Conference Board Consumer Confidence Index for June. Consumer confidence is expected to fall modestly after improving more than expected in May.

-Throughout the week, we will see several regional services and manufacturing data points from Federal Reserve Banks in Dallas, Philadelphia, Chicago, and Richmond.

-On Thursday, we expect the preliminary release of durable goods orders for May. Headline durable goods orders are set to remain unchanged, whereas core goods orders are expected to rise.

-Finally, on Friday we’ll receive the personal income and spending report for May. Personal income and spending are set to rise after smaller-than-expected increases in April.

Authored by the Investment Research team at Commonwealth Financial Network.