Urgent Update: The attempted assassination of former president Donald Trump at a political rally on Saturday has introduced a massive unknown into the markets. How investors will react to the uncertainty is a guessing game at present, though our assumption is the situation should even out after a few shaky days.
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Stocks ended the week with gains, with the Dow Jones Industrial Average (DJIA) taking the rally’s lead. On Friday, major indexes strongly rebounded from their previous day’s slump. The blue-chip DJIA and the S&P 500 (SPX) hit record highs before giving back some gains later in the session. The Nasdaq Composite (NDAQ) finished the week with a small gain, while the large-cap tech benchmark Nasdaq-100 (NDX) ended slightly down for the week, having suffered a major sell-off on Thursday.
Federal Reserve Chair Jerome Powell’s testimony before Congress boosted investor sentiment on Wednesday, sparking an avalanche of rate-cut bets. Traders are now seeing increased odds of two interest rate decreases this year, with the first one arriving in September. The central bank’s head said that while labor market conditions remain strong, they have cooled “pretty significantly.” Powell also reiterated that the Fed doesn’t need to see inflation falling below 2% to begin easing policy, but rather steady progress towards this target to gain more confidence that rate cuts are justified.
Thursday’s CPI report, which showed the first month-on-month decline in inflation in four years, was greeted with another investor attempt at sector rotation. Large tech shares sold off as investors took profits, rotating to small caps and sectors expected to profit from monetary policy easing, such as materials, utilities, and real estate. Although the rotation attempt was short-lived, with the technology shares returning to draw buyers on Friday, the continued disinflation trend and increased odds of an imminent rate cut, coupled with rich tech stocks’ valuations, are expected to lead to further broadening of stock gains in the coming months. This week will be relatively light on economic data and speeches by central bankers, with the main market catalyst shifting to be the earnings season. However, market participants will also follow the economic reports as they provide data points for the Federal Reserve’s future policy decisions.
Three Economic Events
Here are three economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» June’s Retail Sales – Tuesday, 07/16 – This report provides information on the amount of money consumers are spending on various durable and non-durable goods. It helps to gauge the economy’s health, consumer spending habits, and the level of demand-side inflation pressures.
» June’s Industrial Production – Wednesday, 07/17 – This report shows the volume of production of U.S. industries like manufacturing, mining, and utilities. Although industrial production accounts for a smaller portion of economic activity than services, its sensitivity to consumer demand and interest rates makes it a leading indicator of GDP growth and economic performance.
» June’s Existing Home Sales Change – Thursday, 07/18 – This report measures the sales volumes and prices of existing single-family homes, condos, and co-ops nationwide. Existing homes account for over 90% of total home sales in the country. This report therefore provides insights into the health of the housing market, which has significant implications for economic activity throughout the U.S.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
