Market Perspective for July 23, 2023

The third full week of July saw several pieces of news that provided critical clues about the direction that markets may be heading. On Monday, the Empire State Manufacturing Index was released, and it dropped to 1.1 from 6.6 a month ago. However, this figure was higher than the -3.5 forecasted by analysts prior to Monday’s release. What this means is that there was a slowdown in manufacturing compared to last month but that the sector is still growing.

On Tuesday, retail sales and core retail sales figures from June were released. Core retail sales were up .2 percent while all retail sales were also up .2 percent over the previous month. Core sales were expected to go up by .4 percent while all sales were expected to increase by .5 percent during the last 30 days.

Industrial production figures were also submitted on Tuesday, and they were down .5 percent last month, which was the same as the previous report. It was expected that industrial production would remain flat.

On Wednesday, it was revealed that there were 1.43 million new housing starts in the United States, which was lower than the 1.56 million starts last month. Building permits were also down in the previous month with only 1.44 million issued compared to 1.5 million in May.

There was further evidence of softness in the housing market as it was reported that existing home sales dropped to 4.17 million from 4.3 million last month. This is important because home prices have largely stayed resilient in recent years because of a lack of available properties on the market.

Thursday also saw the release of the Philly Fed Manufacturing Index, which came in at -13.5. This was lower than the -13.7 last month but was higher than the -10.7 that was forecast by analysts in recent days. Unemployment claims data for the past week was also made public on Thursday. There 228,000 claims during that period, lower than the 237,000 claims from two weeks ago.

The Dow 30 was up 2.16 percent this week to finish at 35,227. As with last week, the Dow hit its low on Monday at 34,493 before steadily climbing during the rest of the week to finish at its high on Friday.

The Nasdaq was down .8 percent last week to finish at 14,032. On Wednesday, the market hit its high of 14,425 before reversing and easing its way lower on Thursday and Friday. The weekly high was slightly below the high of the previous 52 weeks, which is 14,446.

As with the Nasdaq, the S&P 500 hit its weekly and monthly high on Wednesday before easing down on Thursday and Friday. However, unlike the Nasdaq, the S&P 500 would finish the week up .6 percent to close at 4,536.

The upcoming week is going to be full of important news. On Monday morning, the Flash Services PMI and Flash Manufacturing PMI reports will be issued. The CB Consumer Confidence report will be issued on Tuesday while the Federal Open Market Committee (FOMC) will meet on Wednesday.

While it’s expected that the Fed will raise interest rates by 25 basis points, there is some discussion that another skip may be warranted. It’s also possible that the Fed will decide that a July rate hike will be the final one of the current tightening cycle.

On Thursday, advance quarterly GDP figures will be released along with unemployment claim figures for the previous week. Finally, on Friday, the Core PCE Price Index will be released as well as the quarterly Employment Cost Index and revised University of Michigan Consumer Sentiment and Inflation Expectation reports.

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