Presented by Mark Gallagher

Technology and small-caps moved sharply lower on softening earnings outlook and U.S. economic data. Bonds rallied sharply as investors flocked to safe haven assets amid potentially slowing U.S. growth.

Quick Hits

1. Report releases: Hiring slowed notably in July as the unemployment rate rose to a two- year high.
2. Financial market data: Small-caps and tech stocks fell on U.S. growth concerns.
3. Looking ahead: This week will be light: Institute for Supply Management (ISM) data and the international trade balance will be the two major releases.

Keep reading for an in-depth look.

Report Releases—July 29–August 2, 2024

Conference Board Consumer Confidence Index: July (Tuesday)

Consumer confidence improved more than expected in July, due to improving consumer expectations for future economic conditions.

-Expected/prior month consumer confidence: 99.7/97.8

-Actual consumer confidence: 100.3

Federal Open Market Committee (FOMC) Rate Decision: July (Wednesday)

As expected, the Federal Reserve (Fed) left the federal funds rate unchanged after its July meeting. Fed chair Jerome Powell indicated in his post-meeting news conference that the central bank may consider cutting interest rates at its next meeting in September, depending on economic conditions.

ISM Manufacturing Index: July (Monday)
Manufacturer confidence fell more than expected in July, due in part to a notable drop in manufacturer hiring. The index sits at its lowest level since November 2023, signaling headwinds for the manufacturing industry.

-Expected/prior ISM Manufacturing index: 48.8/48.5

-Actual ISM Manufacturing index: 46.8

Employment Report: July (Friday)

Hiring continued to slow in July; 114,000 jobs were added against calls for 175,000. The unemployment rate unexpectedly rose to 4.3 percent during the month, its highest level in more than two years.

-Expected/prior change in nonfarm payrolls: +175,000/+179,000

-Actual change in nonfarm payrolls: +114,000

The Takeaway

-Consumer confidence improved in July, with those surveyed expecting an improvement in future conditions.

-Manufacturing and employment were both lower than expected.

Financial Market Data

Equity

Source: Bloomberg, as of August 2, 2024

The equity markets took a decidedly risk-off stance. The Russell 2000 and Nasdaq indices were down more than 6.6 percent and 3.3 percent, respectively. Equities moved lower for several reasons, including a tough week of earnings for some of the large names. Amazon provided soft third-quarter earnings guidance and Microsoft saw slower-than-expected cloud growth. Meta Platforms was a standout. Other areas of concern included a significant miss on Friday’s employment report, rising Middle East tensions, and a strengthening Japanese yen.

Fixed Income

Source: Bloomberg, as of August 2, 2024

The yield curve continued its plunge lower, with Treasuries between 2-year and 10-year (often referred to as “the belly”) seeing the largest impact. The 2-, 5-, and 10-year maturities fell 52 basis points (bps), 46 bps, and 40 bps, respectively, closing at 3.87 percent, 3.62 percent, and 3.8 percent.

The Takeaway

-Equities took a major risk-off approach, as softer data led to concerns over a slowing U.S. economy.

-Bonds posted a sharp rally on this risk-off mood. The 10-year closed the week below 4 percent for the first time since May 2023.

 Looking Ahead

This week will be lighter in terms of economic data and events.

-The week kicks off on Monday with the release of the S&P Global Purchasing Managers’ Index (PMI) final U.S. PMI figure and ISM Services index for July. The S&P Global U.S. Composite PMI will provide an indication of the state of the U.S. economy. The prior month came in at 55, which indicates the economy is still firmly in expansionary territory. The ISM Services index is expected to be 51.3, up from 48.8 in June.

-On Tuesday, we expect the release of the international trade balance for June. The trade deficit is expected to shrink for the first time in three months.

Finally, on Thursday afternoon, Richmond Fed President Tom Barkin will speak. We’ll look to gauge what the Fed’s thoughts are after a soft jobs report and market volatility.

Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000^® Index measures the performance of the 2,000 smallest companies in the Russell 3000^® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com

Authored by the Investment Research team at Commonwealth Financial Network.

© 2024 Commonwealth Financial Network

Presented by Mark Gallagher

Quick Hits

1. Mixed Month for Stocks

Stock returns were mixed in July.

2. Bonds Positive

Falling interest rates led to positive bond returns for the third consecutive month.

3. Inflation Cools

Inflation showed signs of continued improvement during the month.

4. Improving Economic Growth

Other economic reports released during the month showed signs of improvement.

5. Risks Remain

Markets face a variety of risks in the second half of the year.

6. Encouraging Backdrop and Positive Outlook

Markets and the economy set for continued growth.

Mixed Month for Stocks

July was a mixed month for stocks, as investors rotated away from large technology companies into a more diversified approach. The S&P 500 gained 1.22 percent during the month while the Dow Jones Industrial Average managed a 4.51 percent gain. The technology-heavy Nasdaq Composite index lagged its peers but ended the month down only 0.73 percent following a last-day rally.

These mixed results came despite supportive fundamentals. Per Bloomberg Intelligence, as of July 31, with 58 percent of companies having reported earnings, the average earnings growth rate for the S&P 500 in the second quarter was 11.7 percent. This is above analyst estimates at the start of earnings season for an 8.3 percent increase. Over the long run, fundamentals drive market performance, so the better-than-expected earnings growth is a positive sign for investors.

Technical factors were supportive as well during the month. All three major U.S. indices spent the entire month well above their respective 200-day moving averages. (The 200-day moving average is a widely followed technical indicator, as sustained breaks above or below this level can signal shifting investor sentiment for an index.) The continued technical support in July was another positive development
for investors.

International stocks were up, with the MSCI EAFE Index gaining 2.93 percent in July while the MSCI Emerging Markets Index was up 0.37 percent. Both major international indices also received technical support as both spent the entire month above their respective 200-day moving averages.

Bond Positive

It was a good month for fixed income investors, as falling interest rates led to rising bond prices. The 10-year Treasury yield fell from 4.48 percent at the start of the month to 4.09 percent by month-end. The Bloomberg U.S. Aggregate Bond Index was up a solid 2.34 percent during the month.

High-yield bonds also had a positive start to the second half of the year, as the Bloomberg U.S. Corporate High Yield Index gained 1.94 percent in July. High-yield spreads ended the month largely unchanged, leaving them relatively tight on a historical basis.

Inflation Cools

The drop in interest rates in July was due in large part to continued signs of progress in the fight against inflation. The June Consumer Price Index report showed consumer prices fell by 0.1 percent during the month. This brought the year-over-year pace of inflation down from 3.3 percent in May to 3 percent in June. As you can see in Figure 1, this is the lowest level in more than a year and now marks three consecutive months with improvements.

Figure 1: CPI-U All Items, Year-Over-Year Percentage Change

Source: Bureau of Labor Statistics/Haver Analytics, July 11, 2024

While there is still work to be done to get back to the Federal Reserve’s 2 percent inflation target, the improvements over the past few months have been encouraging.

Given the progress on the inflation front, investor expectations for rate cuts rose during the month. We entered July with futures markets pricing in a roughly 60 percent chance of a rate cut at the Fed’s September meeting. Following the release of the June inflation reports and the conclusion of the Fed’s July meeting, markets ended the month fully pricing in a 25 basis point rate cut in September. Fed chair Jerome Powell indicated in his post-meeting press conference that the Fed remains data-dependent when setting interest rates; however, he did note that a rate cut in September is a real possibility provided the data supports a cut.

The Takeaway

-Consumer inflation continued to improve in June.

-Market expectations for rate cuts rose during the month, with all eyes on the Fed’s next meeting in September.

Improving Economic Growth

The economic data releases in July showed continued signs of a healthy economic expansion. The second-quarter GDP report showed that the annualized pace of economic growth rose from 1.4 percent in the first quarter to 2.8 percent in the second quarter. This result was well above economist estimates for a more modest 2 percent growth rate and highlights the health of the continued economic expansion. Personal consumption growth rose from 1.5 percent in the first quarter to a solid 2.3 percent in the second quarter.

The June employment report showed continued hiring growth, as 206,000 jobs were added in June following a downwardly revised 218,000 in May. This headline result was a Goldilocks outcome as it represents solid employment growth without sparking fears of a potentially overheating economy. With that being said, the underlying data showed some signs of cracks in the labor market, with the unemployment rate rising to a two-year high of 4.1 percent during the month. This will be an important area to monitor in the months ahead as the Fed attempts to achieve its dual mandate of stable prices and maximum employment.

Finally, consumer spending remained solid. Headline and core retail sales came in well above economist estimates in June, with the 0.8 percent rise in core sales representing the largest monthly increase in more than a year. Personal income and spending growth also remained healthy in June. Given the importance of consumer spending on the overall economy, these updates were welcome developments.

The Takeaway

-The economic data releases in July showed signs of continued healthy growth.

-GDP growth accelerated in the second quarter.

-Consumer spending remained solid in June. 

Risks Remain

While inflation has improved in recent months, it remains a risk for markets and the economy. Further progress in getting prices down is expected in the months ahead; however, there is still real work to be done to get back to the Fed’s 2 percent target and we may face setbacks along the way. Any unexpected signs of faster inflation would likely rattle markets in the short term. Additionally, economists and investors will be keeping a close eye on the labor market for any signs of further weakness.

July also highlighted the large level of political uncertainty that we face here in the U.S. This uncertainty is expected to ramp up as we approach the election in November, which could negatively impact markets later in the year.

International risks remain as well, highlighted by the ongoing conflicts in Ukraine and the Middle East as well as the continued economic slowdown in China. While the direct market impact of these international risks has largely been muted so far this year, they are a source of potential uncertainty that should be monitored going forward.

The Takeaway

-Inflation remains a real risk for markets.

-Election-related uncertainty is expected to pick up as we approach the November elections.

-International risks could also pressure markets in the second half of the year.

Encouraging Backdrop and Positive Outlook

On the whole, we remain in a relatively good place as we look to finish out the summer months. The economic backdrop remains supportive, and signs of a soft landing continue to show in the data. Company fundamentals are also healthy, signaling potential further growth and further
appreciation ahead.

While there are real risks that markets and the economy face, we’ve managed to successfully navigate through periods of uncertainty in the past and this time is no different. It’s certainly possible that we’ll face minor setbacks in the months ahead; however, we believe the most likely path forward is for continued economic growth and market appreciation. Given the potential for setbacks, a well-diversified portfolio that matches investor goals and timelines remains the best path forward for most. If concerns remain, you should speak to your financial advisor to go over your financial plans.

Disclosure: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. 

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com

Authored by the Investment Research team at Commonwealth Financial Network.

© 2024 Commonwealth Financial Network

Presented by Advisor Name
Mark Gallagher
Small-cap and value stocks outperformed amid weak Tesla and Alphabet earnings. Short- to intermediate-term Treasuries were bid up, as investors look to lock in higher yields ahead of a cut in September.

Quick Hits

1. Report releases: Second quarter GDP growth came in above economist estimates, as growth accelerated during the quarter.
2. . Financial market data: Small-caps and value stocks outperformed amid weakness in Tesla and Alphabet earnings.
3. Looking ahead: This will be a big week in terms of data and economic events, with both the Federal Reserve (Fed) decision and July employment report due out.

Keep reading for an in-depth look.

Report Releases—July 22–29, 2024

Existing Home Sales: June (Tuesday)

The pace of existing home sales slowed more than expected in June, as high mortgage rates and rising prices weighed on home buyers.

-Expected/prior month existing home sales change: –3.2%/–0.7%

-Actual existing home sales change: –5.4%

GDP Annualized Second Quarter Advance June (Tuesday)

Economic growth accelerated more than expected in the second quarter, due in part to better-than-expected personal consumption growth. This now marks eight consecutive quarters with solid economic growth.

-Expected/prior quarter GDP growth: +2.0%/+1.4%

-Actual GDP growth: +2.8%

Durable Goods Orders: June (Thursday)
Headline durable goods orders came in below expectations, largely due to a slowdown in volatile non-defense aircraft orders. Alternatively, core orders showed a solid 0.5 percent rise, indicating solid business investment.

-Expected/prior durable goods orders monthly change: +0.3%/+0.1%

-Actual durable goods orders change: –6.6%

-Expected/prior core durable goods orders monthly change: +0.2%/–0.1%

-Actual core durable goods orders change: +0.5%

Personal Spending and Personal Income: June (Friday)

Personal income and spending both continued to improve, with income growth coming in slightly below expectations, while spending was in line with economist forecasts.

-Expected/prior personal income monthly change: +0.4%/+0.4%

-Actual personal income change: +0.2%

-Expected/prior personal spending monthly change: +0.3%/+0.4%

-Actual personal spending change: +0.3%

The Takeaway

-Existing home sales surprised to the downside in June.

-Second quarter GDP surprised to the upside.

Financial Market Data

Equity

Source: Bloomberg, as of July 26, 2024

The recent rotation and broadening in equity performance continued this week. The Russell 2000 and Dow Jones Industrial Average led the way, as small-caps and value names rallied. Tech-oriented names continued to falter, as Tesla (TSLA) struggled amid auto margins and Alphabet (GOOG/GOOGL) struggled amid YouTube ad revenue. IBM (IBM) outperformed as it beat both sales and earnings expectations supported by its business tied to generative AI.

Fixed Income

Source: Bloomberg, as of July 26, 2024

The belly of the curve caught a bid this past week, with the areas between the 2- and 5-year maturities among those of most interest to investors. The 5-year Treasury moved 8 basis points (bps) lower to close the week at 4.08. The 2-year yield dropped 13 bps to close at 4.39.

The Takeaway

-Small-caps continued their rally amid mega-cap earnings misses.

-Short-to-intermediate term Treasuries were bid up by investors as people look to lock in higher yields ahead of a cut in September.

Looking Ahead

This will be a big week in terms of data and economic events. The highlight of the week will be the Wednesday Federal Open Market Committee (FOMC) rate decision, which will have investors looking for confirmation of a September rate cut. Friday will wrap with the employment report for July.

-The week kicks off on Tuesday with the release of consumer confidence, which is expected to fall modestly in July for the second consecutive month.

-On Wednesday, we anticipate the release of the FOMC rate decision. The Fed is widely expected to keep interest rates unchanged at the conclusion of their July meeting; however, economists and investors will be keeping a close eye on Fed chair Jerome Powell’s post-meeting press conference for hints about the future path of monetary policy.

-The ISM Manufacturing Index for July is expected on Thursday. Manufacturer confidence is expected to improve modestly in July after falling for the third consecutive month in June.

-Finally, the week wraps with the employment report for July. Hiring is expected to cool yet remain in healthy territory in July. The unemployment rate is set to remain unchanged at 4.1 percent during the month.

Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000^® Index measures the performance of the 2,000 smallest companies in the Russell 3000^® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

###

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com

Authored by the Investment Research team at Commonwealth Financial Network.

© 2024 Commonwealth Financial Network

Presented by Mark Gallagher

Small-cap stocks posted a major rally as potential interest rate cuts offered relief amid recent struggles. Short-term Treasuries rallied on the lower Consumer Price Index (CPI) report as investors locked in elevated short-term rates.

Quick Hits

1. Report releases: Consumer prices were softer than expected in June; producer prices surprised to the upside.
2. Financial market data: Small-cap stocks posted a major rally as potential interest rate cuts offered relief.
3. Looking ahead: This week, data will focus on retail sales, housing, and industrial production.

Keep reading for an in-depth look.

Report Releases—July 8–12, 2024

National Federation of Independent Business Optimism Index: June (Tuesday)

Small business optimism rose to 91.5, exceeding last month’s level of 90.3 and expectations of 90.5.

Consumer Price Index (CPI): June (Wednesday)

Consumer inflation slowed on a monthly and year-over-year basis in June. Year-over-year, core consumer inflation fell to its lowest level in more than three years and headline price growth matched a three-year low.

-Prior monthly CPI/core CPI growth: +0.0%/+0.2%

-Expected monthly CPI/core CPI growth: +0.1%/+0.2%

-Actual monthly CPI/core CPI growth: –0.1%/+0.1%

-Prior year-over-year CPI/core CPI growth: +3.3%/+3.4%

-Expected year-over-year CPI/core CPI growth: +3.1%/+3.4%

-Actual year-over-year CPI/core CPI growth: +3.0%/+3.3%

Producer Price Index (PPI): June (Friday)
Producer prices increased more than expected in June, with headline and core price growth exceeding economist estimates.

-Prior monthly PPI/core PPI growth: +0.0%/+0.3%

-Expected monthly PPI/core PPI growth: +0.1%/+0.2%

-Actual monthly PPI/core PPI growth: +0.2%/+0.4%

-Prior year-over-year PPI/core PPI growth: +2.4%/+2.6%

-Expected year-over-year PPI/core PPI growth: +2.3%/+2.5%

-Actual year-over-year PPI/core PPI growth: +2.6%/+3.0%

Preliminary University of Michigan Consumer Sentiment Survey: July (Friday)

Consumer sentiment unexpectedly fell to start July, with worsening consumer views on current economic conditions and future expectations weighing on sentiment.

The Takeaway

-Small business confidence surprised to the upside; consumer confidence missed expectations.

-Consumer prices were softer than expected in June, but producer prices surprised to the upside.

Financial Market Data

Equity

Source: Bloomberg, as of July 12, 2024

The Russell 2000 led the way last week, gaining more than 6 percent. Softer-than-expected CPI data led to a major rally in small-caps. Softer inflation data supports the likelihood that the Federal Reserve (Fed) will cut interest rates in June. That might start the cycle of easing, which would offer solace to small-cap firms that have struggled with variable rate debt exposure.

Fixed Income

Source: Bloomberg, as of July 12, 2024

The yield curve saw an inversion on the back of the softer-than-expected CPI report. Short-term yields dropped sharply as investors locked in elevated rates with the potential for a Fed rate cut increasing. The back end of the curve fell to a lesser extent as investors locked in shorter-term Treasuries. The 2-year yield fell 14 basis points (bps) to close at 4.46 percent and the 30-year fell 7 bps to 4.4 percent.

The Takeaway

-Small-caps posted a major rally as potential rate cuts offered relief amid recent struggles.

-Short-term Treasuries rallied on the lower CPI report as investors locked in elevated short-term rates.

Looking Ahead

This week, we expect data on retail sales, housing, and industrial production.

-The week kicks off on Tuesday with the release of retail sales for June and the National Association of Home Builders Housing Market Index for July. Retail sales are expected to fall after increasing modestly in May. Home builder confidence is expected to remain unchanged after falling more than expected in June.

-Wednesday will also be a busy day, with the release of housing starts, building permits, and industrial production for June. Housing starts are expected to rise and permits are set to fall modestly. Economists expect to see a solid increase in industrial production, driven in part by rising capacity utilization.

Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000^® Index measures the performance of the 2,000 smallest companies in the Russell 3000^® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com

Authored by the Investment Research team at Commonwealth Financial Network.

© 2024 Commonwealth Financial Network