The Week On Wall Street
Positive inflation data failed to lift stocks from their August doldrums last week as economic data and a ratings downgrade soured investor sentiment. The Dow Jones Industrial Average added 0.62%, while the Standard & Poor’s 500 slipped 0.31%. The Nasdaq Composite index fell 1.90% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.50%.
Tech Weighs on Stocks
Stocks struggled last week, beginning on a strong note ahead of key inflation data and selling off mid-week in response to a downgrade of the banking sector by credit rating agency Moody’s and news of a steep drop in China’s exports. Emblematic of the week, stocks jumped to big gains following Thursday’s better-than-expected inflation report, only to evaporate as bond yields rose amid an auction of 30-year Treasury bonds. Stocks have had difficulty sustaining traction with the loss of the technology’s leadership, which has propelled gains this year. The combination of higher yields and earnings that failed to validate tech's elevated valuations has dragged the sector and the larger market.
Subdued Inflation
July’s inflation data reflected only moderate price pressures. Consumer prices increased by a modest 0.2%, which aligned with market expectations. In comparison, the annual inflation rate came in at 3.2%, slightly below consensus estimates–though higher than June’s annual increase of 3.0%. Core CPI (excludes food and energy) was particularly encouraging, rising at the slowest rate since October 2021. Producer prices painted a more mixed picture, coming in a bit higher than expected, rising 0.3% versus the expected 0.2% increase, though the year-over-year increase was just 0.8%. Core producer prices’ 12-month increase of 2.4% tied for the lowest since January 2021.
This Week: Key Economic Data
Tuesday: Retail Sales.
Wednesday: Housing Starts. Industrial Production. FOMC Minutes.
Thursday: Index of Leading Economic Indicators. Jobless Claims.
This Week: Notable Companies Reporting Earnings
Tuesday: The Home Depot, Inc. (HD)
Wednesday: Cisco Systems, Inc. (CSCO), Target Corporation (TGT), The TJX Companies, Inc. (TJX)
Thursday: Walmart, Inc. (WMT), Applied Materials, Inc. (AMAT), Ross Stores, Inc. (ROST)
Friday: Palo Alto Networks, Inc. (PANW), Deere & Company (DE)
Positive inflation data failed to lift stocks from their August doldrums last week as economic data and a ratings downgrade soured investor sentiment. The Dow Jones Industrial Average added 0.62%, while the Standard & Poor’s 500 slipped 0.31%. The Nasdaq Composite index fell 1.90% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.50%.
Tech Weighs on Stocks
Stocks struggled last week, beginning on a strong note ahead of key inflation data and selling off mid-week in response to a downgrade of the banking sector by credit rating agency Moody’s and news of a steep drop in China’s exports. Emblematic of the week, stocks jumped to big gains following Thursday’s better-than-expected inflation report, only to evaporate as bond yields rose amid an auction of 30-year Treasury bonds. Stocks have had difficulty sustaining traction with the loss of the technology’s leadership, which has propelled gains this year. The combination of higher yields and earnings that failed to validate tech's elevated valuations has dragged the sector and the larger market.
Subdued Inflation
July’s inflation data reflected only moderate price pressures. Consumer prices increased by a modest 0.2%, which aligned with market expectations. In comparison, the annual inflation rate came in at 3.2%, slightly below consensus estimates–though higher than June’s annual increase of 3.0%. Core CPI (excludes food and energy) was particularly encouraging, rising at the slowest rate since October 2021. Producer prices painted a more mixed picture, coming in a bit higher than expected, rising 0.3% versus the expected 0.2% increase, though the year-over-year increase was just 0.8%. Core producer prices’ 12-month increase of 2.4% tied for the lowest since January 2021.
This Week: Key Economic Data
Tuesday: Retail Sales.
Wednesday: Housing Starts. Industrial Production. FOMC Minutes.
Thursday: Index of Leading Economic Indicators. Jobless Claims.
This Week: Notable Companies Reporting Earnings
Tuesday: The Home Depot, Inc. (HD)
Wednesday: Cisco Systems, Inc. (CSCO), Target Corporation (TGT), The TJX Companies, Inc. (TJX)
Thursday: Walmart, Inc. (WMT), Applied Materials, Inc. (AMAT), Ross Stores, Inc. (ROST)
Friday: Palo Alto Networks, Inc. (PANW), Deere & Company (DE)
Final Thoughts
Its the summer doldrums. Markets are historically weak this time of year and so far they are being consistent with that statement. Last week, J.P. Morgan said the risk of recession has declined and they are forecasting more growth. Markets are still hung up on interest rates for the moment. I'm in the camp they won't raise anymore, but the Fed has always gone a little too far, so we'll just have to wait and see.
Now, let’s try a little thought experiment.
Think back over the last couple of years to a time when you read something about money in the news, you acted on it, and then, with the benefit of hindsight, you were glad you did. This could include any number of things: the latest IPO, bear markets, bull markets, mergers, or market collapses. Whatever.
Go ahead, I’ll wait. Close your eyes and think about it.
Think of all the financial pornography out there, think of the number of dental offices that have CNBC playing in the background, think of the USA Today Money section. And almost all of it is noise. Almost none of it is actionable.
Occasionally, we get information—you know, facts and figures. But most of that is useless because it doesn’t matter to you, or it is beyond your control anyway. The noise is worthless, the information is useless, and then, every once in a while, there is a little teeny tiny speck that might be useful.
Its the summer doldrums. Markets are historically weak this time of year and so far they are being consistent with that statement. Last week, J.P. Morgan said the risk of recession has declined and they are forecasting more growth. Markets are still hung up on interest rates for the moment. I'm in the camp they won't raise anymore, but the Fed has always gone a little too far, so we'll just have to wait and see.
Now, let’s try a little thought experiment.
Think back over the last couple of years to a time when you read something about money in the news, you acted on it, and then, with the benefit of hindsight, you were glad you did. This could include any number of things: the latest IPO, bear markets, bull markets, mergers, or market collapses. Whatever.
Go ahead, I’ll wait. Close your eyes and think about it.
Think of all the financial pornography out there, think of the number of dental offices that have CNBC playing in the background, think of the USA Today Money section. And almost all of it is noise. Almost none of it is actionable.
Occasionally, we get information—you know, facts and figures. But most of that is useless because it doesn’t matter to you, or it is beyond your control anyway. The noise is worthless, the information is useless, and then, every once in a while, there is a little teeny tiny speck that might be useful.
This leads to one obvious question: Why are we paying attention in the first place?
It might be fun—if you’re into that kind of fun. You know, like going to the circus. You might consider it part of your job to be up on the latest market news. But most likely, it's just a waste of your time and potentially a driver of anxiety.
So now I'll get out my little permission-granting wand and grant you permission to stop paying attention to all the noise. Instead, use that time to work on that list you have…
You know, “The List.” The one that has all the really important things you actually want to do with your life. Hang out with your kids, learn how to play an instrument or take an extra shift to pay off debt.
Yeah, that list.
Doesn’t that sound so much better than spending another hour watching CNBC?
Make it a great week!
