7-29-24 Monday Minute
By Dan Stober on July 29, 2024
Earnings season remained the hot topic last week outside of the political chaos. Luckily for the broader market, banks kicked it off on a relatively high note. S&P 500 financials’ earnings have been up 17%, on average, so far this earnings season. Tech earnings mid-week changed the narrative a bit and the equity markets took it as an opportunity to consolidate. On Thursday, U.S. initial jobless claims ticked slightly lower to 235,000 and U.S. real GDP rose more than expected at +2.8% q/q A.R. in 2Q. Consumer spending contributed 1.6% points, capex 0.7%, and govt 0.5%. Friday’s PCE inflation report came in at 2.5% year over year, in line with estimates and the lowest reading since February 2021. PCE is, in fact, the measure that the Fed uses to target 2.0% inflation. The U.S. economy overall has been robust enough to take an extended Fed rate pause. There’s a case however building for Fed rate cuts sooner than later, which likely added to the rebound in stocks on Thursday and Friday. The markets finished mixed on the week with the DOW trading higher by .77% and both the S&P 500 and NASDAQ finishing lower, -.82% and -2.08% respectively. The Federal Reserve meeting this week will likely take a dovish tone, confirming the market’s move to end the week. The Fed is widely anticipated to hold the federal funds rate steady, but Wall Street is also expecting some kind of strong indication that the central bank will begin easing policy in September. Earning season also continues with some big names reporting this week. So far, 41% of S&P 500 companies have reported their earnings results for the second quarter. Of those companies, the blended earnings growth rate is 9.8%, the highest reading since 2021 (Source: Factset).