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Stock Market Today – Friday, July 29: What You Need to Know

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After the hawkish move by the Fed on Wednesday, Thursday and Friday brought us disappointing economic data. Yet, investors are showing surprising optimism, despite PCE inflation data coming in higher than expected.

Stocks Finish Friday’s Session in Positive Territory; Chicago PMI Comes in Lower than Expected

Last Updated 4:15 PM EST

Stock indices finished Friday’s trading session in the green. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 gained 0.97%, 1.42%, and 1.81%, respectively.

The consumer staples sector was the session’s laggard, as it fell by 0.78%. Conversely, the energy sector (XLE) was the session’s leader, with a gain of 4.34%.

In addition, the U.S. 10-Year Treasury yield decreased to 2.66%, while the Two-Year Treasury yield increased, as it hovers around 2.88%. This brings the spread between them to -22 basis points.

Furthermore, the United States Chicago Purchasing Managers Index was released by ISM-Chicago, which measures the economic health of the manufacturing sector in Chicago. An expansion is defined by a number that is greater than 50, whereas a reading that is lower is considered a contraction.

It appears that the sector is still expanding in July, as the number came in at 52.1. However, this was lower than the expected 55 from forecasters and a decrease from last month’s report of 56. It’s worth noting that the Chicago PMI had been trending lower since its peak of 75.2 back in May 2021.

Consumer Spending Comes in Stronger than Expected

Last Updated 3:00 PM EST

Equity markets are in the green heading into the final hour of today’s trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.9%, 1.4%, and 1.7%, respectively.

On Friday, the U.S. Department of Commerce released its Real Personal Consumption report. This data measures the change in personal consumption for goods and services on a month-over-month basis, adjusted for inflation. Real Personal Consumption increased by 0.1% in June compared to a 0.3% decrease in the previous month.

Similarly, the Bureau of Economic Analysis (BEA) released its Personal Spending report, which measures the inflation-adjusted change in all spending by consumers. This number increased by 1.1% month-over-month compared to the expected 0.9%. For reference, it increased from the previous month’s reading of 0.3%.

In addition, the BEA also released data on the change in personal income, which was an increase of 0.6% versus expectations of 0.5%.

Together, these numbers suggest that consumer demand picked up in June. This is despite the fact that inflation continues to run hot without any real signs of slowing down.

It’s also worth noting that spending increased faster than personal income, suggesting that consumers might be taking on debt to fund their purchases. Clearly, these levels aren’t sustainable and are likely to slow down going forward.

Core PCE Comes in Higher than Expected

Last Updated 12:00PM EST

Stocks are in the green halfway into today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.4%, 0.8%, and 0.9%, respectively.

On Friday, the Bureau of Economic Analysis released its Core Personal Consumption Expenditure (PCE) Price Index for the month of June. Since this is the Fed’s preferred measure of inflation, it tends to have more influence over Jerome Powell’s decisions than the CPI does.

On a month-over-month basis, PCE growth came in at 0.6%, which was slightly higher than expectations of 0.5%. Unfortunately, it is still above the 0.1% to 0.2% range that it consistently hovered around prior to the pandemic.

On a year-over-year basis, PCE increased by 4.8%, which is higher than last month’s reading of 4.7%. This was also higher than expected as Economists had forecast a print of 4.7%. Nevertheless, it is still lower than the February 2022 peak of 5.4%.

Unfortunately, core PCE doesn’t include food and energy prices. When including these two items, year-over-year PCE accelerated to 6.8%, which surpassed the previous peak of 6.6% seen in March. The increase was 1% on a month-over-month basis.

Thus, although Jerome Powell said that the Federal Reserve might slow down rate hikes going forward, it might actually not if inflation numbers keep coming out higher than expected.

Stocks are in the Green to Start Friday’s Trading Session

Last Updated 10:00AM EST

Stock indices are in the green 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.2%, 0.7%, and 1%, respectively.

The consumer staples sector (XLP) is the laggard so far, as it is down 1.1%. Conversely, the consumer discretionary (XLY) is the session’s leader with a gain of 3%.

WTI crude oil remains just below $100 per barrel as demand for gasoline remains lower than pre-pandemic levels, which is the result of high prices at the pump. However, physical markets remain undersupplied. As a result, the price is hovering around the high-$99 per barrel range, up roughly 2.5% from the previous close.

Meanwhile, bond yields are higher, as the U.S. 10-Year Treasury yield is now hovering around 2.694%. This represents an increase of 1.4 basis points from the previous close.

Similar movements can be seen with the Two-Year yield, which is now at 2.907%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -21.3 basis points.

Pre-Market Update

Stock futures climbed in the early hours of Friday as the market tried to extend the rally that began after the Federal Reserve hiked the interest rate on Wednesday. The positive sentiment puts the S&P 500 on track to close the best month since November 2020, if the rally can be sustained until the end of the day.

Futures on the Dow Jones Industrial Average (DJIA) gained 0.21%, while those on the S&P 500 (SPX) moved 0.60% higher, as of  7.46 a.m. EST, Friday. Meanwhile, the Nasdaq 100 (NDX) futures significantly advanced by 0.89%.

Strong quarterly results from Amazon (AMZN) and Apple (AAPL) pushed market sentiments up.

Notably, the S&P 500, the Dow, and the Nasdaq 100 closed Thursday’s trading with gains of 1.21%, 1.03%, and 0.92%, respectively. Surprisingly, these gains followed Wednesday’s announcement of a 75 basis point interest rate hike by the Fed.

Moreover, investors also remained optimistic after the release of disappointing second-quarter economic data. The gross domestic product of the U.S. was revealed to have contracted by 0.9% on an annualized basis in Q2, after recording a 1.6% contraction in Q1. This means that the economy has gone through two consecutive quarters of shrinking GDP, which is what is defined in the books as a recession.

The possible hope is that the Fed eases its policy tightening moves in the forthcoming meetings, which may help the economy avoid a recession.

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