Week of July 21, 2023 Weekly Recap & The Week Ahead
Monday, July 24th, 2023“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” — Warren Buffett
1. Retail Sales Rose in June as Inflation Eased — Retail sales—a measure of spending at stores, online and in restaurants—rose a seasonally adjusted 0.2% last month from the month before, the Commerce Department said Tuesday. That was a slower pace than in May and April and matched the 0.2% increase in consumer prices last month, a sign that Americans’ spending is keeping up with, but not outpacing, inflation. In June, shoppers picked up their spending on furniture, electronics and online shopping. Sales at grocery stores, gasoline stations, hardware and sporting goods stores dropped. Dining out at bars and restaurants was broadly flat.
2. High Rates, Low Supply Hinder Home Buying This Summer — Elevated mortgage rates resulting from the Federal Reserve’s actions since early last year are keeping many buyers out of the market and reducing demand. At the same time, the rates are discouraging homeowners from selling, limiting the supply of homes for sale. Existing home sales, which make up most of the housing market, decreased 3.3% in June from the prior month to a seasonally adjusted annual rate of 4.16 million, the National Association of Realtors said Thursday. That was the slowest sales pace since January. June sales fell 18.9% from a year earlier.
3. White House Says Amazon, Google, Meta, Microsoft Agree to AI Safeguards — the White House said seven major AI companies—Amazon.com AMZN 0.03%increase; green up pointing triangle, Anthropic, Google, Inflection, Meta Platforms META -2.73%decrease; red down pointing triangle, Microsoft MSFT -0.89%decrease; red down pointing triangle and OpenAI—are making voluntary commitments that also include testing their AI systems’ security and capabilities before their public release, investing in research on the technology’s risks to society, and facilitating external audits of vulnerabilities in their systems. Before OpenAI launched its GPT-4 model in late March, the company spent roughly six months working with external experts who tried to provoke it to produce harmful or racist content. Most companies also developing large language models rely heavily on humans who teach these models to be engaging and helpful and avoid generating toxic responses through a process called reinforcement learning with human feedback.
The week ahead — Economic data from Econoday.com:
Posted in Week of July 14, 2023 Weekly Recap & The Week Ahead
Monday, July 17th, 20231. CPI Report Shows Inflation Eased to 3% in June — the consumer-price index climbed 3% in June from a year earlier, the Labor Department said Wednesday, sharply lower than the recent peak inflation rate of 9.1% in June 2022, when gasoline prices hit a U.S. record average of $5 a gallon. The June rate declined from 4% in May. Inflation was last close to 3% in March 2021. Consumers paid less last month for used cars and airline fares, and their rent increased at the slowest one-month pace since early 2022. Prices for car insurance and recreation services rose. Fed officials are on track to raise rates to a 22-year high at their July 25-26 meeting because economic activity hasn’t slowed down as much as anticipated. But the inflation report calls into question whether the Fed will lift rates after that, as most officials projected last month.
2. The Rapid Rise of Threads Appears to Be Hurting Twitter — Mark Zuckerberg, chief executive of Threads parent Meta Platforms said the new microblogging platform hit 100 million sign-ups less than a week after launching. At least two third-party estimates suggest Twitter traffic has been falling in tandem, an indication that its users may be leaving it for Threads rather than attempting to juggle both. The two products look and function in similar ways. Both focus on sharing short snippets of text but also allow users to post photos and videos. One distinction is that joining Threads requires having an account with Meta’s Instagram, which has more than 2 billion monthly users. That has made signing up easy and fast, though deleting a Threads account means also having to delete one’s Instagram account.
3. U.S. Takes Third Shot at Shoring Up Money-Market Funds — The Securities and Exchange Commission voted 3-2 Wednesday to change the rules governing money-market funds, which the Federal Reserve had to backstop with emergency lending facilities in 2008 and 2020. Two previous overhauls by the SEC failed to stop investors from fleeing certain funds en masse when markets faced extreme stress. Following criticism from mutual-fund lobbyists and some lawmakers, the SEC dialed back Wednesday’s rules from a version it proposed in 2021. That had included a requirement for some funds to implement so-called swing pricing, a mechanism used in Europe that aims to keep investors in the funds from seeing their shares diluted when others pull out in times of stress.
Instead, the final rule requires certain money-market funds used by institutional investors to impose fees when a fund sees daily net redemptions that exceed 5% of net assets.
4. Google’s Bard AI Chatbot Adds More Languages to Take On ChatGPT — The Alphabet GOOG 4.36%increase; green up pointing triangle unit plans Thursday to add several new features to Bard, its generative-AI chatbot, including the ability to converse in 43 additional languages, from Arabic to Vietnamese. The company will also make Bard available across much of Europe and in Brazil, territories that are home to hundreds of millions of people. The rollout also includes additional privacy features that were requested by European Union regulators last month, delaying the chatbot’s release in the region.
Here is a summary of the market last week:
Inflation data: The main event of the week was the release of inflation data on Wednesday. Both headline and core inflation came in lower than expected, with headline inflation falling to 3.0% and core inflation falling to 4.8%. This was seen as a sign that inflation is starting to cool, which helped to boost stocks.
Fed meeting: The Fed also met last week and hinted that they may be slowing the pace of interest rate hikes in the coming months. This was also seen as positive for stocks, as it reduced the risk of a recession.
Stocks: As a result of these factors, stocks had a strong week, with the S&P 500 and the NASDAQ Composite both gaining more than 2%. The NASDAQ Composite had its best week in four months.
Bonds: Bonds also performed well last week, with yields falling across the board. This was due to the combination of lower inflation and the expectation of slower Fed rate hikes.
Overall, it was a positive week for the markets, as investors welcomed the signs that inflation is starting to cool. However, it is important to note that inflation is still well above the Fed’s target, so there is still some risk that the central bank will need to continue raising rates.
Here are some additional details:
The S&P 500 closed the week at 3,902.06, up 2.04%.
The NASDAQ Composite closed the week at 11,607.62, up 3.11%.
The 10-year Treasury yield closed the week at 3.12%, down 11 basis points.
The week ahead — Economic data from Econoday.com:
Posted in Week of July 7, 2023 Weekly Recap & The Week Ahead
Tuesday, July 11th, 2023“If you have an approach that makes money, then money management can make the difference between success and failure… … I try to be conservative in my risk management. I want to make sure I’ll be around to play tomorrow. Risk control is essential.” – Monroe Trout
1. China’s Export Curb on Chip-Making Metals Prompt Countries to Explore Supply-Chain Diversification — China produces around 60% of the world’s germanium and around 80% of its gallium, according to the Critical Raw Materials Alliance, an industry body. China mines and exports large quantities of gallium and germanium, providing the raw materials to countries such as the U.S. and Japan that process them into high-end products, which can then be used in manufacturing advanced semiconductors, military radars, LED panels, solar panels, electric vehicles and wind turbines. By contrast, China processes other minerals like cobalt, which are mined elsewhere. More export control measures are likely to come. The U.S. is likely to release in the coming weeks final and upgraded regulations related to export curbs of advanced chips and equipment that it announced in October, The Wall Street Journal has reported.
2. US Services Activity Expand by Most in Four Months on Stronger Demand — The Institute for Supply Management’s overall gauge of services increased 3.6 points — the most since the start of the year — to 53.9 last month. Readings above 50 represent expansion, and the index exceeded all forecasts in a Bloomberg survey of an economists. In a welcome sign on inflation, the group’s measure of prices paid for materials and services dropped to the lowest level since March 2020.
3. Wage Gains, Low Unemployment Keep Pressure on Fed; Hiring Cooled in June — U.S. employers added 209,000 workers in June, a solid monthly gain but down from May’s revised 306,000. In the first half of this year, payrolls grew by an average of 278,000 a month, down from nearly 400,000 last year.
The unemployment rate fell to 3.6% last month from 3.7% in May. Employers ramped up wages as they competed for a limited pool of workers. Average hourly earnings grew 4.4% in June from a year earlier, matching gains in the preceding two months and remaining well above the prepandemic pace. The latest jobs and wage data add to evidence that economic activity hasn’t slowed as much as Fed officials expected, and leaves them likely to lift interest rates to a 22-year high at their July 25-26 meeting. Inflation has eased from its recent peak a year ago, but remains roughly double the Fed’s 2% target.
The week ahead — Economic data from Econoday.com:
Week of June 30, 2023 Weekly Recap & The Week Ahead
Wednesday, July 5th, 2023“Do more of what works and less of what doesn’t”. — unknown
1. U.S. Home Prices Posted First Annual Decline Since 2012 in April — Home prices posted their first year-over-year price decline in 11 years in April, as higher mortgage rates made home purchases more expensive for buyers. The S&P CoreLogic Case-Shiller National Home Price Index, which measures home prices across the nation, fell 0.2% in April, compared with a 0.7% annual growth rate the prior month. The annual decline was the first for the index since April 2012. The average rate for a 30-year fixed mortgage was 6.67% in the week ended June 22, up from 5.81% a year earlier, according to Freddie Mac.
2. First-quarter economic growth was actually 2%, up from 1.3% first reported in major GDP revision — The U.S. economy showed much stronger-than-expected growth in the first quarter than previously thought, according to a big upward revision Thursday from the Commerce Department. Gross domestic product increased at a 2% annualized pace for the January-through-March period, up from the previous estimate of 1.3% and ahead of the 1.4% Dow Jones consensus forecast. This was the third and final estimate for Q1 GDP. The growth rate was 2.6% in the fourth quarter.
The upward revision helps undercut widespread expectations that the U.S. is heading toward a recession. A separate economic report released Thursday showed layoffs running well below expectations, indicating that labor market strength has held up even in the face of the Federal Reserve’s 10 interest rate hikes totaling 5 percentage points.
3. Polestar is the latest EV maker to announce a move to Tesla’s North American charging standard — new Polestar vehicles sold in North America will come standard with the Tesla-designed North American Charging Standard, or NACS, plug starting in 2025. Owners of existing Polestars will be able to charge at Tesla’s Supercharger stations with an adapter starting in mid-2024. Polestar’s deal follows an identical one announced by corporate sibling Volvo Cars on Tuesday. Ford Motor , General Motor and Rivian have also announced similar deals with Tesla in recent weeks.
4. Consumer Spending Streak Extended in May, Inflation Cooled — consumer spending, the primary driver of economic growth, rose 0.1% in May from the prior month, the Commerce Department said on Friday, compared with a revised 0.6% increase in April. Americans spent more on services such as healthcare and air travel, while spending on goods such as autos declined. Spending was flat in May when adjusted for inflation. The Fed’s preferred gauge of consumer prices, the personal-consumption expenditures price index, rose 3.8% from a year earlier, down from 4.3% in April. So-called core prices, which exclude volatile food and energy categories, rose 4.6% in May from a year earlier, down slightly from 4.7% in April. Economists see core inflation as a better predictor of future inflation than overall inflation. From the prior month, overall prices increased 0.1%, easing from a 0.4% rise in April.
The week ahead — Economic data from Econoday.com:
