Concerns of slowing growth were constant this week, but surprising the stock market showed similar resiliency! In fact, the markets traded through growth worries to show a winning week before Snap decided to ruin the party with their Q2 earnings report and sour view of the conditions for online advertisements.
Before Snap’s report after Thursday’s close, the Nasdaq was up 5.2% and the S&P was up 3.5% for the week. They ended up closing the week with 3.3% and 2.5% gains respectively. These major indexes reclaimed a position above their 50-day moving average.
Overall, despite the small setback on Friday, the stock market had a good week. However, economic data releases weren’t as positive. To name a few statistics for you: The July NAHB Housing Market Index had its biggest drop since April 2020, June housing starts and home sales showed some weakness, initial jobless claims hit 250,000 for the first time since November of 2021, the July Philadelphia Fed Index fell to -12.3, the June Leading Economic Index had its fourth consecutive decline, and both the HIS Market Manufacturing PMI and Services PMI slipped lower.
On top of the economic data, big players in tech including Google, Microsoft, Apple, and Snap have indicated that they plan to slow their number of new hires.
The Treasury market showed more of this pain than the stock market did, with a number of notes falling more than 10 basis points for the week. The market reacted to bad economic readings and disappointing earnings reports throughout the week as if it was not a surprise. In all honesty, it isn’t a surprise. The first half of this year was largely predicated on a belief that the market would be dealing with bad economics and earnings for some time, and that’s proven to be true.
With clear signs of slower growth and falling interest rates, it was the growth stocks that took the lead in the drive higher this week. The Russell 3000 Growth Index was up 3.2% versus a 2.4% gain on their value index. The Philadelphia Semiconductor Index surged 5.5% off the shoulder of the $52 billion chip bill that should pass the Senate this next week.
Next week, potentially impactful items on the economic calendar include the next Fed meeting on Wednesday, a GDP and Manufacturing reading on Thursday. We also have a packed earnings calendar.
Last week did much better than I had anticipated. However, I’m sticking with my bear case again for the next week. The Fed will announce another rate hike, which has room to surprise, and earnings next week is very tech heavy, which could drag down the indexes if they disappoint.
Regardless of the way things move, we will buy structurally sound companies that pay safe dividends and have a promising future. We did this last week with some buys in INTC and ALLY to name a few. Read the portfolio update here.