Market Update | August 11th - August 15th

Indexes

The S&P 500 gained 1.0% this week, the NASDAQ added 1.3%, and the Dow Jones Industrial Average rose 1.7%, each marking their second consecutive positive week. Expectations of a potential Federal Reserve interest rate cut have boosted investor optimism.

Bonds

The yield (annual payment received on a bond, expressed as a percentage) of the 10-year U.S. treasury note rose 4 basis points (which means .04%) throughout the week as investors continued assessing possible effects of tariffs on economic growth and inflation. The 2-year note and 30-year bond followed similar trend.

Commodities

The price of U.S. crude oil continued falling this week, dropping by about 3%. This is the lowest level since May. For reference, it was trading around $75 in mid-June. After a large rally last week, gold prices pulled back after CPI data was released showing that inflation was under control. This led investors to riskier assets, decreasing demand for gold and therefore its price.

Events

Rate Cut Expectations

July's Consumer Price Index (CPI) data showed inflation holding steady at 2.7%. This, along with a cooling labor market (which means meaning slower job growth and fewer hires than expected) has led to growing expectations that the Federal Reserve will implement a rate cut at its September meeting to speed up the economy.

More Economic Data Reports

We mentioned that CPI data was positive; however, 2 other reports were released that weren't quite as reassuring. First, the Producer Price Index (PPI), which measures how much businesses are paying for goods and services, rose 0.9% in July. This was the biggest jump in over a year, showing that inflation may be picking up. On Friday, the University of Michigan Consumer Sentiment Index, which tracks how confident people feel about the economy and their own finances, fell from 61.7 to 58.6. That means consumers are feeling less confident and expect prices to keep rising. Together, these reports stoked some concern about inflation, and it's definitely something to keep an eye on going forward.

Small Cap Company Growth

This week, small-cap stocks (companies whose total value of all their outstanding shares, called market capitalization, is between $300 million and $2 billion) had a strong run. Most indexes tracking US Small Cap companies rose around 3%, much better than Large Cap Indices typically gained around 1% on the week.

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What's Next

Next week, we have a mix of earnings reports and economic reports to watch:

• Monday: Palo Alto Networks (PANW)

• Tuesday: Housing Starts and Permits, Home Depot (HD), Medtronic (MDT)

• Wednesday: FOMC Minutes, TJX (TJX), EIA Petroleum Status Report

• Thursday: Jobless Claims, Existing Home Sales, Lowe’s (LOW), Walmart (WMT), EIA Natural Gas Report