8/12/24 Weekly Market Commentary

What happened last week…

On Monday, the DJIA (-2.60%) and S&P 500 (-3.00%) had their biggest daily losses since September 2022. The NASDAQ finished -3.43%. On Thursday, stocks rebounded and the S&P 500 had its best day (2.31%) since November 2022. Weekly performances were: DJIA (-0.60%), S&P 500 (-0.04%), NASDAQ (-0.18%). A potential rate cut in September, already hinted at by Fed officials in July, could be larger than previously expected. According to the CME FedWatch Tool, as of August 9, there is a 51.5% probability of a 50-basis point cut and a 48.5% probability of a 25-basis point cut after the Fed’s September 18 meeting. The stock market’s initial poor reaction to recent economic data shifted expectations toward a larger reduction than what was forecasted on July 31 when a 50-basis point reduction had only a 12% probability.

A federal judge has ruled that Alphabet (GOOG) violated U.S. antitrust law where it illegally monopolized its online search and advertising. In the court’s ruling, U.S. District Judge Amit Mehta wrote, “Google is a monopolist, and it has acted as one to maintain its monopoly.” Highlighted in the ruling was Alphabet’s exclusive contracts to make its search engine the default option on cellphones and other devices, such as its deal with Apple. The next phase of this lawsuit, originally filed in 2020, is scheduled for early September where changes or penalties could be announced.

The non-manufacturing PMI for July beat expectations (51.0) as it increased to 51.4 from 48.8, pushing the reading back into expansion territory. The figure had fallen into contraction (below 50) twice in the previous four months but has expanded 47 of the past 50 months.

According to FactSet, as of August 9, 91% of S&P 500 companies have reported earnings with 78% having a positive EPS surprise and 59% having a positive revenue surprise. The blended earnings for the S&P 500 is 10.8%, which would be the highest rate since Q4 2021 (31.4%). The blended revenue for the index is 5.2%, which would be the 15th straight quarter of growth.

Happening this week…

On Wednesday, the inflation rate year-over-year for July is expected to decrease to 2.9% from 3.0%, which was the third straight monthly decline and the lowest reading since June 2023 (3.0%). The rate peaked at 9.1% in June 2022. Meanwhile, the core inflation rate year-over-year for July is expected to decrease to 3.2% from 3.3%, which is more than a three-year low.

Thanks for Reading!

- The Rockline Team

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