Last Week
The stock market posted its best week since late June, driven by solid quarterly earnings and the prospect of lower interest rates.
Following another series of beats across multiple sectors, the growth rate for S&P 500 earnings increased from 10.3% to 11.8% the week earlier, and 4.9% at the beginning of the reporting season. Additionally, the concern about a recession, a dominant theme on the first-quarter earnings calls, disappeared during the quarter. There were only 16 companies that mentioned “recession” this quarter versus 124 mentions during the previous quarter’s earnings releases. Traders have become comfortably numb to the potential impact of tariffs on the economy, even though the “Liberation Day” trade barriers technically went into effect during the week. President Trump said he planned to slap 100% tariffs on semiconductor imports, while exempting U.S. manufacturers.
On the interest rate front, President Trump nominated Stephen Miran to fill the vacancy on the Fed’s board of governors. The position comes with a spot on the interest rate-setting Federal Open Market Committee after Fed Gov. Adriana Kugler resigned early. Kugler’s 14-year term did not expire until January, but she was set to leave the post on Friday. Mr. Miran will certainly vote in support of lower interest rates. The Fed’s last decision to hold rates steady included two votes to lower rates. Traders are betting there will be a rate cut at the upcoming September meeting.
For the week, the benchmark S&P 500 and the Russell 2000 climbed +2.4%, while the Nasdaq Composite gained 3.9%. Advancing issues doubled declining issues, with only the Health Care and Energy sectors posting modest losses. Crude oil sank over 5%, as Gold surged to new highs and the Dollar weakened. The yield on the 10-year Treasury inched up 8 basis points to 4.28%. Lower short-term rates could result in higher long-term rates and a steepening yield curve.
On the Chicago Sports Scene, Cubs fans are now turning their attention to the wildcard playoff spots as the Milwaukee Brewers have pulled away in the NL Central.
The Bears opened their preseason schedule with a 24-24 tie against the Miami Dolphins
This Week
Earnings season will wind down with just eight S&P 500 companies reporting results.
On Tuesday, the Bureau of Labor Statistics will release the consumer price index for July. The consensus estimate is for a 2.8% year-over-year increase. A soft reading would solidify the odds of a September rate cut, while a hot one could upset the apple cart.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.