Weekly Economic Update: July 30, 2024

Presented by Nicholas Wealth Management

Up, down and all around

Mid-week market mayhem was unleashed last week, as the major indexes dropped significantly off their record highs after disappointing earnings reports from some of the tech giants. The S&P sold off more than 2% on Wednesday, its largest one-day drop in more than a year, while the Nasdaq saw its worst loss since October 2022.

Tech has been a major upward driver this year, so it’s no surprise it was also the catalyst for last week’s dip. But markets might want to look at the bigger picture; analysts are predicting overall earnings for the S&P 500 have risen 9.8% over the past year. If that number holds, it will be the largest year-over-year earnings growth since the fourth quarter of 2021.

Other positive data led to a slight rebound on Thursday: Non-defense durable goods orders rose 1% in June, while weekly jobless claims fell more than expected. Plus, the first reading of second-quarter gross domestic product (GDP) showed the economy grew by 2.8%, well above expectations and higher than the 1.5% gain in the first quarter.

The other good news was that personal consumption expenditures (PCE) stayed steady at an annual rate of 2.5%. The Federal Reserve prefers this number to measure inflation, and the fact that the last reading wasn’t too far off the Fed’s 2% target will play into their discussion about rate cuts during their meeting this week. Indeed, futures markets are pricing in zero chance of the federal funds rate staying at its current level by the September meeting.

Coming This Week

• The big market-mover this week will be the Fed meeting on Tuesday and Wednesday. Markets will be listening closely to Fed Chair Jerome Powell’s post-meeting comments on Wednesday to see what he has to say about potential rate cuts in September.
• It won’t come out in time to make a difference in the Fed’s rate decision, but we’ll see the latest employment data this week. The ADP employment report for July will come out on Wednesday, followed by non-farm payrolls on Friday.
• Other significant data this week includes consumer confidence (Tuesday), pending home sales (Wednesday), manufacturing costs and construction spending (Thursday), and wages and factory orders (Friday).
• We’ll also continue to see second-quarter earnings throughout the week.

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