Market Perspective for July 16, 2023

Last week provided a number of clues as to the strength of the economy as well as what the Federal Reserve will do during their July meeting. On Wednesday morning, monthly CPI and Core CPI data was released. On a monthly basis, Core CPI fell from .4 percent to .2 percent, which beat analyst expectations of a .3 percent increase. The Core CPI data takes into account everything except for food and energy prices as they tend to be more volatile.

Normal CPI increased .2 percent over the previous month, which was higher than the .1 percent reading issued in June but lower than the .3 percent increase predicted by economists. The yearly CPI figure was 3 percent, which was lower than the 4 percent reading issued in June and also lower than the 3.1 percent predicted by analysts.

Unemployment claims data was also released on Thursday morning, and they showed that there were fewer claims this week compared to last. Over the last seven days, 237,000 people filed for unemployment benefits, which was down from 249,000 a week ago and lower than the estimated 251,000 claims.

On Friday, the University of Michigan released its consumer sentiment and inflation expectation reports. Consumer sentiment improved to 72.6 from 64.4 in June, which is the highest figure in almost two years. However, inflation expectations did increase to 3.4 percent from 3.3 percent compared to a month ago.

Currently, there are a mixture of opinions coming from the Fed as to what should happen in two weeks when the Federal Open Market Committee (FOMC) meets. Some believe that another rate hike is warranted regardless of what happens the rest of the month. Those who share that view have cited stubbornly high food and rent prices as well as the possibility that the decrease in inflation is an artifact in the data. In other words, inflation data may only look good because it is being compared to extremely high price increases from the previous year.

The S&P 500 finished up 2.27 percent this week to finish at 4,505. The market started at the low of the week on Monday and steadily climbed on Tuesday, Wednesday and Thursday. The market peaked on Friday morning at 4,524 before easing back to its final price.

The Nasdaq was up 3.42 percent this week to finish at 14,113. Like the S&P 500, the Nasdaq would bottom out on Monday morning at 13,592 before steadily climbing until hitting 14,216 on Friday morning.

Finally, the Dow 30 would finish the week up 2 percent at 34,509. As with the other major indices, the Dow would make a low on Monday before steadily climbing for the rest of the week. However, unlike the other two indices, the Dow would make a high of 34,545 on Wednesday before settling into a trading range on Thursday and Friday.

Next week sees the release of several important news items starting with the Empire State Manufacturing survey on Monday morning. Retail sales data is set to be released on Tuesday while the Philly Fed Manufacturing Index is set to be released on Thursday along with weekly unemployment claims data. Finally, existing home sales data is expected to be released on Thursday, which may give more clues as to the state of the economy.

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