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Equities Rise Amid Pending Fed Rate Decision
Most of the major equity indexes rose last week as investors assessed earnings season and the pending Fed rate decision. Global equities (represented by the MSCI All Country World Index) were up 0.18%, and domestic stocks (represented by the S&P 500 Index) were up 0.70%.
S&P 500
The second week of earnings season concluded with about 18% of S&P 500 companies reporting results so far. Of those who have reported, 75% have beaten earnings per share estimates according to FactSet. However, the blended earnings decline of S&P 500 companies currently is -9.0% which would be the largest decline since the second quarter of 2020.
US Retail Sales
US retail sales for June continued to show resilience in the sector, however, at a slower pace. June’s increase of 0.2% from the previous month missed consensus estimates of 0.6%. May’s figure was also revised upwards from the initial reading of 0.3% to 0.5%.
Leading Economic Index
The Conference Board’s Leading Economic Index (LEI) fell for the 15th month in a row in June. The index dropped 0.7% for June and is down -4.2% over the last six months. While S&P 500 returns have been a positive contribution to the index, lower manufacturing new orders, weaker consumer sentiment around business conditions, and increased initial jobless claims have brought the index lower.
US Federal Reserve
The US Federal Reserve holds its next two-day policy-setting meeting this week concluding on Wednesday. The market heavily expects a 0.25% rate hike following their last decision to keep rates steady in June as the Fed continues to progress towards their goal of bringing inflation down to target.
Q2 US GDP
This week the initial estimates of the Q2 US GDP will be released. First quarter GDP was revised upward to 2.0% from 1.3%, and many economists are expecting a modest rise for the past quarter. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, will also be reported this week for June as well. Headline PCE has fallen drastically down to a year-over-year rise of 3.9% in May from a peak of 7.0% in June 2022. Core PCE (excludes food and energy) has moderated at a slower pace.
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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