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Markets were in choppy waters last week, with potential semi-conductor headwinds and CRWD rolling out a faulty update leading to the largest computer disruption in history. Major indexes fell, as big tech stock was ditched for broader markets amid optimism about upcoming rate cuts. Energy and Financials led the way in S&P 500 sector gains, while Communication Services and Information Technology led sector losses. Overall, markets are still tightly tracking the Fed, leaning in for every whisper surrounding its next move.
Data Source: Factset® Performance Period: 7/15/2024 to 7/19/2024
U.S. Politics saw turbulence last week, with Trump emerging from the assassination attempt in Butler with a unifying tone and selecting J.D. Vance as his Vice-Presidential running mate. Meanwhile, President Biden announced he was dropping from the Presidential race and Vice President Kamala Harris became the Democratic nominee. We expect markets to experience heightened volatility as potential policy implications remain unclear.
The markets continue to closely follow Fed Chair Jerome Powell for hints about potential rate cuts. During his July 15th interview at the Economic Club of Washington DC, he indicated that the central bank would cut rates before inflation falls to the 2% target. Although Powell still refused to signal the timing of lowering rates, he reiterated that additional “good inflation data” is key to such a decision – data which is beginning to trickle in. Markets reacted favorably.
In economic news, U.S. retail sales came in unchanged for June, beating the anticipated 0.4% reduction. The home builder confidence index for July lowered to 42, rather than the forecasted 44 and June’s 43. Yet, housing starts for June increased 3% from the month prior and building permits rose 3.4% last month, leaving conflicting indicators on the state of housing. Industrial production for June went up 0.6%, beating the estimated 0.3% but below May’s 0.9%. The U.S. Leading Index for last month declined 0.2%, above the predicted -0.3% decrease and May’s 0.4% decrease. In sum, retail, industrial production, and leading economic indicators in the economy have exceeded expectations.
This week brings existing and new home sales data. GDP data will come on Thursday. Friday will deliver personal income and spending numbers as well as Personal Consumption Expenditures (PCE). PCE will be closely watched as it is seen as a pivotal link in the odds of a September policy rate cut, being the inflation target rate relied on by the Federal Reserve.
Last week the Russell 2000, comprised of the smallest stocks in the index, experienced its most significant streak of gains in more than two decades and its largest overall increase for the period in four years. The reason for the surge ties back to the Fed. Between the Fed’s commitment to data-based decision making and recent cooling Inflation data and rise in unemployment, markets are optimistic about a rate cut in the coming months. This is good news for smaller businesses that currently grapple with elevated borrowing expenses. In light of the Fed’s reliance on data and the market’s anticipations, an old proverb serves as a reminder about the importance of having vision. “Where there is no vision, the people are unrestrained, but happy is one who keeps the Law” (Proverbs 29:18).
Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights
Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights. Securities offered through American Portfolios Financial Services, Inc. of Holbrook, New York, 631.439.4600,(APFS), member FINRA, SIPC. Faithward Advisors is not owned or operated by APFS. Faithward Advisors offers Investment Advisory services through Ambassador Advisors, an SEC Registered Investment Advisor. Dream More, Plan More, Do More is a registered trademark of Faithward Advisors, LLC, Reg. U.S. Pat. & Tm. Off. Any opinions expressed in this forum are not the opinion or view of Faithward Advisors or American Portfolios Financial Services, Inc. (APFS). They have not been reviewed by either firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.