Weekly Update – July 17, 2023
The Week on Wall Street
Better-than-expected updates last week on consumer and wholesale price inflation buoyed investor sentiment, driving stocks higher and lower bond yields.
The Dow Jones Industrial Average rose 2.29%, while the Standard & Poor’s 500 increased 2.42%. The Nasdaq Composite index advanced 3.32% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 4.67%.1,2,3
Inflation Sparks Stocks
Back-to-back positive inflation reports emboldened investors, sending stocks to their highest levels since April 2022. Lower-than-forecast inflation on both consumer prices and producer prices sparked investor optimism that inflation may be able to fall further without tipping the economy into recession and provide the basis for the Fed to moderate its more hawkish rate hike stance.4
After four straight days of increases, investor attention turned to the kickoff of a new earnings season on Friday. Despite some positive earnings surprises from several big banks and a major healthcare provider, stocks closed out a good week with a slight decline.
Inflation Cools
Inflation continued its downward trend last month, falling at its slowest pace in over two years. Consumer prices rose 0.2% in June and 3.0% from a year ago. Both were below economists’ consensus forecast. Core inflation (excludes food and energy), which has been more stubborn, fell to 4.8% year-over-year–its lowest level since October 2021.5
The positive disinflationary story continued the following day with a lighter-than-forecast increase in producer prices. Wholesale prices increased 0.1% in June, which was lower than the consensus forecast of 0.2%. The increase from a year ago was also 0.1%, representing the smallest gain in nearly three years. Core producer price rose 2.6% year-over-year.6
THIS WEEK: KEY ECONOMIC DATA
Tuesday: Retail Sales. Industrial Production.
Wednesday: Housing Starts.
Thursday: Existing Home Sales. Index of Leading Economic Indicators. Jobless Claims.
THIS WEEK: COMPANIES REPORTING EARNINGS
Tuesday: Bank of America Corporation (BAC), Lockheed Martin Corporation (LMT), Morgan Stanley (MS), The Charles Schwab Corporation (SCHW), The PNC Financial Services Group, Inc. (PNC), Prologis, Inc. (PLD)
Wednesday: Netflix, Inc. (NFLX), Tesla, Inc. (TSLA), International Business Machines Corporation (IBM), The Goldman Sachs Group, Inc. (GS)
Thursday: Johnson & Johnson (JNJ), Blackstone, Inc. (BX), Intuitive Surgical, Inc. (ISRG), Abbott Laboratories (ABT), American Airlines Group, Inc. (AAL), CSX Corporation (CSX), Freeport-McMoRan, Inc. (FCX), United Airlines Holdings, Inc. (UAL), Capital One Financial Corporation (COF)
Friday: American Express Company (AXP)
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1. The Wall Street Journal, July 14, 2023
2. The Wall Street Journal, July 14, 2023
3. The Wall Street Journal, July 14, 2023
4. The Wall Street Journal, July 13, 2023
5. The Wall Street Journal, July 12, 2023
6. The Wall Street Journal, July 13, 2023