Weekly Review: Week Ending July 26, 2024
The Nasdaq led U.S. stocks significantly lower on Wednesday after disappointing earnings reports from Alphabet and Tesla raised concerns about Big Tech's waning influence in driving market gains. By Friday, the market had recovered somewhat, but the S&P 500 and Nasdaq still closed down 1.85% and 3.61% for the week, respectively. Year-to-date, the S&P 500 is up 14.61% and the Nasdaq 15.63%. Small-cap stocks bucked the trend, adding 2.05% for the week and now up 8.77% for the year (FactSet).
In June, the housing market displayed mixed signals. New home sales fell by 0.6%, contrary to expectations of a significant increase, reflecting ongoing market weakness. The median price of new homes dipped slightly compared to last year. Existing home sales also fell short of expectations, despite an increased supply of homes on the market. Interestingly, the median price of existing homes hit a record high of $426,900, up 4.1% from $410,100 last year. All regions experienced declines in sales, yet prices remained strong (US Census Bureau).
The contrast between the slight decline in new home prices and the rise in existing home prices highlights a shift towards a buyer’s market. According to the National Association of Realtors, homes are taking longer to sell and receiving fewer offers, with increased inventory potentially putting downward pressure on prices.
The GDP for Q2 came in at a higher-than-expected 2.8% rate, a welcome improvement after the 1.4% growth in Q1. Meanwhile, the Personal Consumption Expenditures (PCE), the Federal Reserve's preferred measure of inflation, came in at an expected 2.5%, down from May’s 2.6% and March and April’s 2.7%. This continuing downward trend increases the likelihood of the Fed reducing interest rates this year. The next Fed meeting is on September 18th, with a 90% chance of a 0.25% rate decrease and a 10% chance of a 0.50% decrease, according to the CME FedWatch Tool.
Looking Ahead
This coming week is busy. The Fed policy meeting concludes on Wednesday, with Jerome Powell expected to speak on August 1st. On Friday, we’ll receive the jobs report. Throughout the week, there will be a series of employment, unemployment, and housing/construction reports. Notably, Microsoft will report earnings on Tuesday, and Apple on Thursday, which will be closely watched following last week’s tech results from Tesla and Alphabet.
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