S&P 500 records best week of 2024

Good Afternoon. Markets made a come-back this week as the volatility index (VIX) dropped under 15 (from last week’s sudden intraday spike above 65). As discussed last week, last week’s rise in the VIX was primarily due to technical reasons rather than concerns about the fundamentals of the US economy.

Better-than-expected monthly retail sales numbers and Walmart’s latest earnings report showed that the sudden drop in stock prices last week due to recessionary fears was likely an overreaction. The S&P 500 is now just 2% away from its mid-July record high.

For the week:

• The S&P 500 gained 3.93%, its best week since November 2023. The Nasdaq added 5.29%, and the Dow advanced by 2.9%.

CNN's Fear & Greed Index now stands at 35 (Fear) out of 100, an increase of 11 points from last week.

The top five trending stocks on Reddit are AST Spacemobile, Nvidia, Rocket Lab, SPY, and VOO.

Next week, the FOMC meeting minutes on Wednesday and Jarome Powel's Jackson Hole speech on Friday will be the spotlight.

The consumer price index, a broad-based measure of prices for goods and services, increased 0.2% for the month, putting the 12-month inflation rate at 2.9%, its lowest since March 2021.

New-home construction in the US fell in July to the lowest level since the aftermath of the pandemic as builders responded to weak demand, keeping inventory levels high.

Sales at US retailers unexpectedly surged in July, the Commerce Department said Thursday, rising by a solid 1% from the prior month, up from June’s downwardly revised 0.2% decline. That trounced economists’ expectations of a 0.3% gain.

Goldman Sachs debuted in the spot bitcoin ETF market in the second quarter, purchasing $418 million worth of bitcoin funds. Rival Morgan Stanley trimmed its crypto holdings. JPMorgan has yet to make a big splash. Morgan Stanley was the first among the big players on Wall Street to give the green light to its 15,000 financial advisors to start pitching clients, who have a net worth north of $1.5 million, bitcoin ETFs, specifically those issued by BlackRock and Fidelity.

Federal Reserve Chair Jerome Powell recently attended a closed-door meeting with big-bank CEOs, encouraging them to work with the Fed to avoid a years-long legal battle over the Biden administration’s landmark capital proposal.

S&P Global Ratings upgraded Uber Technologies Inc.’s credit ratings to investment-grade status on Friday, citing the ride-hailing and food-delivery company’s consistent earnings growth.

The days of the standard 6% commission involved in home buying and selling are over. This should eventually reduce the costs buyers and sellers have to pay. It could also introduce new home-buying and selling methods that bypass traditional agents.

Home Depot’s fiscal second-quarter earnings and sales beat expectations, but it expects comparable sales to decline this year. On the earnings call, the company highlighted the recent acquisition of SRS distribution and its expanded partnership with Instacart to improve the interconnected shopping experience nationwide. The home improvement retailer’s CFO told CNBC that homeowners are now deferring projects due to a “sense of greater uncertainty in the economy.”

Walmart beat quarterly earnings and revenue expectations. The discounter raised its full-year outlook based on strength in the first half of the year and steady consumer health, but it was more cautious about the second half.

The S&P 500 is up 16.4% in the first 158 trading days of 2024, the 18th-best start to a year since 1928, and the second-best start to a presidential election year ever.

Source - Charlie Bilello

Daily and weekly indicators for the US economy published by Apollo show no signs of recession in the data.

Bloomberg report shows that the popular yen-centered carry trade that blew up spectacularly two weeks ago is staging a comeback. ATFX Global Markets, an Australian online forex broker, has seen around a 30% to 40% rise in yen shorts in the past week, with a big chunk of the bets driven by hedge funds and high-net-worth investor clients.

The American economy is very confusing now, and just focusing on one data point can lead to a considerable overreaction, as experienced last week when the unemployment number came. This CNN article covers the current state of the US economy. In summary:

• Job growth is slowing,

• Retail spending is good. Consumers aren’t tapped out but are increasingly focused on finding a bargain.

• Housing is still hot, but mortgage rates are coming down, and supply is rising, which will cool off prices. Also, significant changes are coming to how real state commissions are handled, and buyers will have more say in what they pay their brokers.

• The inflation fight is essentially over.

The American Institute of Economic Research article explains how the Federal Reserve dramatically changed its approach to monetary policy after the 2008 financial crisis and the reasons that led to it.

This JP Morgan report provides an excellent analysis of Q2 earnings. Key points -

• Economic growth may be slowing, but earnings are still growing.

• For the first time since 2022, the S&P 493 (S&P 500 excluding magnificent seven stocks) is set to experience positive y/y earnings growth of 5.7% this quarter.

• Margins are the primary driver of EPS growth this quarter.

  

• Manufacturing activity is slowing, which could signal trouble for cyclicals.

• Multiple expansions contributed more to Mag 7 returns in Q2, i.e., stretched valuations.

  

• The correlation between the market cap and equal-weight S&P 500 is at all-time lows.