July 8 – July 12 Week in Review

The U.S. stock market marched higher last week with the Dow, up 1.5%, the Nasdaq, up +1.0%, and the S&P 500, up +0.8%, all reaching fresh record highs. The Russell 2000 was basically unchanged on the week and remains well below its 2018 high. The energy sector was the top performer for the week, climbing 2.2% on the back of higher oil prices.

Video 07.15.2019

The markets were relatively quiet on Monday and Tuesday, as investors awaited Wednesday's semiannual testimony by Fed Chairman Jay Powell on monetary policy. The market got what it was looking for as the comments made were seen as a sure sign that the FOMC will reduce the fed funds target rate range by at least 25 basis points on July 31. 

Chairman Powell said that baseline expectations for solid economic growth remain in place, but he noted that the composition of growth in Q1 was poor due to net exports and inventories driving the overall increase. The Fed chairman also said that growth in consumer spending was weak in Q1 while business investment slowed notably. The dovish remarks led to another increase in expectations for a 50 basis point rate cut. At the end of the week, the fed funds futures market saw a 21.4% implied likelihood of a 50-basis point rate cut on July 31, up from 5.4% one week ago.

Fed officials have been pointing to weakening inflation metrics to justify the growing hopes for a rate cut, but economic data released last week showed a larger than expected increase in Core CPI and Core PPI in June. On a year over year basis, core CPI is up 2.1% while core PPI is up 2.3%. Meanwhile, the Fed's preferred inflation gauge, core PCE, increased 1.7% year over year in Q1, which is a faster rate than what was seen when the central bank began raising rates at the end of 2015.

Investors, however, seem convinced that a rate decrease is coming at the end of the month despite the recent economic data. Barring significant new information on the economy or Fed policy fronts, though those macro factors are set to take a back seat in the coming weeks as second quarter earnings season ramps up.

Fifty six S&P 500 companies are expected to report this week, followed by 122 next week and 121 the week after that. After companies posted year over year earnings per share growth of 0.8% in the first quarter, the consensus estimate is for a 2.7% drop this quarter.

In other markets the 10 year U.S. Treasury note closed at 2.12% last week, a gain of roughly 8 basis points from last Fridays close, despite Chairman Powell’s dovish tone. Crude closed at $60.21 a barrel, a gain of 4.8% from last Friday’s close, on continued tensions in the Middle East. The US Dollar Index closed at 96.72, down fractionally for the week.

July 15 – July 19 Economic Calendar

  • Monday
  • Empire State Mfg Survey
    8:30 AM ET

  • Tuesday
  • Retail Sales
    6:30 AM ET
  • Import and Export Prices
    8:30 AM ET
  • Redbook
    8:55 AM ET
  • Industrial Production
    9:15 AM ET
  • Business Inventories
    10:00 AM ET
  • Housing Market Index
    10:00 AM ET
  • Treasury International Capital
    4:00 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • Housing Starts
    8:30 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Beige Book
    2:00 PM ET
  • Thursday

  • Jobless Claims
    8:30 AM ET
  • Philadelphia Fed Business Outlook Survey
    8:30 AM ET
  • Leading Indicators
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET

  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
    • Friday
    • Consumer Sentiment
      10:00 AM ET

       

    • Baker-Hughes Rig Count
      1:00 PM ET

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. This commentary is a matter of opinion and is for informational purposes only. It is not intended as investment advice and does not address or account for individual investor circumstances. Investment decisions should always be made based on the client's specific financial needs, goals and objectives, time horizon and risk tolerance. The statements contained herein are based solely upon the opinions of Telemus Capital, LLC. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources, which we believe to be reliable, but not guaranteed.

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