Weekly Review for week ending 7-12-24
We had no shortage of economic data to digest last week. Starting with the stock market, the Dow, closed at 40,000, the second time in history it reached that figure. The S&P 500 was up 0.76% for the week, while the NASDAQ was essentially flat. Meanwhile, the S&P 600, a broad small-cap index, rallied an impressive 4.70%, especially considering it was previously down slightly for the year (FactSet). Let's look at the economic data that came to light last week and see if we can make sense of this performance disparity between large-cap and small-cap stocks.
June’s CPI (inflation) report came out better than expected, with a 3% annualized rate. Notably, June’s month-over-month inflation fell 0.1%, the first month-to-month drop since May 2020. Earlier in the week, Jerome Powell, the chairman of the Fed, mentioned that they wanted to see further signs of cooling inflation before considering reducing rates. This inflation print seemed to be a clear delivery of that request. The CME FedWatch Tool, which assesses the probabilities of rate cuts or hikes, is now showing an 88.1% likelihood of a 0.25% rate cut at the September Fed meeting, up from 71% a week earlier.
In my opinion, small-cap stocks, with their smaller balance sheets, are more sensitive to interest rates than their large-cap counterparts. Now that a rate cut seems almost inevitable, it appears investors believe it’s their time to shine.
Looking Ahead: Earnings Season and Housing Market Data
The next few weeks will be earnings season, which will help us see whether or not companies' revenues have been able to match their year-to-date stock performance. We also have some housing market data coming out Tuesday and Wednesday, which will shed light on what seems to be a softening national housing market.
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Information contained herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness.
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
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