Equities posted their best week of the year as economic data eased fears. Bonds were relatively unchanged as investors looked to lock in rates amid a strong recovery over the past two weeks.

Quick Hits

1. Report releases: The pace of year-over-year consumer inflation fell to its lowest level in more than three years.
2. Financial market data: Equities posted their best week of the year as economic data eased fears.
3. Looking ahead: This week, we expect Federal Reserve (Fed) meeting minutes, along with manufacturing and home sales data. 

Keep reading for an in-depth look. 

Report Releases—August 12–16, 2024

Producer Price Index (PPI): July (Tuesday)

Producer inflation came in below economist estimates on both a headline and core basis, which was a positive development after hotter-than-expected producer inflation in June.

• Prior monthly PPI/core PPI growth: +0.2%/+0.3%
• Expected monthly PPI/core PPI growth: +0.2%/+0.2%
• Actual monthly PPI/core PPI growth: +0.1%/+0.0%
• Prior year-over-year PPI/core PPI growth: +2.7%/+3.0%
• Expected year-over-year PPI/core PPI growth: +2.3%/+2.6%
• Actual year-over-year PPI/core PPI growth: +2.2%/+2.4%

Consumer Price Index (CPI): July (Wednesday)

Consumer inflation slowed on a year-over-year basis, with the 2.9 percent annual rise in prices representing the lowest level of consumer inflation in more than three years. 

• Prior monthly CPI/core CPI growth: –0.1%/+0.1%
• Expected monthly CPI/core CPI growth: +0.2%/+0.2%
• Actual monthly CPI/core CPI growth: +0.2%/+0.2%
• Prior year-over-year CPI/core CPI growth: +3.0%/+3.3%
• Expected year-over-year CPI/core CPI growth: +3.0%/+3.2%
• Actual year-over-year CPI/core CPI growth: +2.9%/+3.2%

Retail Sales: July (Thursday)

Retail sales exceeded analyst estimates, with headline sales surging 1 percent against calls for a more modest 0.4 percent increase. Core sales also beat expectations. 

• Expected/prior month retail sales monthly change: +0.4%/–0.2%
• Actual retail sales monthly change: +1.0%

Preliminary University of Michigan Consumer Sentiment Index: August (Friday)

Consumer sentiment increased to start the month. Although views on current conditions dipped month-over-month, expectations for future conditions increased enough to bring the overall index up modestly.

• Expected/prior month consumer sentiment index: 66.9/66.4
• Actual consumer sentiment index: 67.8 

The Takeaway

• Producer prices were softer than anticipated, whereas consumer prices were in line with expectations.
• Retail sales were stronger than expected.

Financial Market Data

Equity

Source: Bloomberg, as of August 16, 2024

U.S. equities continued their risk-on rally as strong economic data eased growth fears. High-flying technology firms led the way higher, with the Nasdaq gaining more than 5 percent. Nvidia and Tesla were notable contributors, rising 18.9 percent and 8.1 percent, respectively. Starbucks and Ulta Beauty rose significantly due to corporate actions: Starbucks poached CEO Brian Niccol from Chipotle, and Ulta Beauty was disclosed as being part of a new stake from Berkshire Hathaway. 

Fixed Income

Source: Bloomberg, as of August 16, 2024

The Treasury yield curve posted modest moves after a dramatic previous two weeks. The areas beyond the 5-year saw the most action, with the long end of the curve flattening modestly. The 5-year, 10-year, and 30-year fell 3 basis points (bps), 5 bps, and 8 bps, respectively. 

The Takeaway

• Equities continued their robust recovery amid stronger economic data.
• Bonds were relatively unchanged, other than some flattening on the longer end of the curve, as investors looked to lock in rates.

Looking Ahead

This week, we look forward to the release of Fed meeting minutes, manufacturing data, and home sales information. 

• The week kicks off on Wednesday with the release of Federal Open Market Committee (FOMC) meeting minutes for July. Although the Fed voted to leave interest rates unchanged after its July gathering, the meeting minutes will still be widely analyzed for hints on the central bank’s path of interest rate policy.
• On Thursday, we expect the release of Preliminary S&P Global PMIs for August and existing home sales for July. We have recently seen softening in manufacturing, though the larger segment in services has lifted the composite PMI higher. Existing home sales are set to increase modestly after falling for four consecutive months.
• Finally, on Friday, new home sales for July will be released. Expectations are for an increase of 2.6 percent to 633,000 homes sold.

Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation. 

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000^® Index measures the performance of the 2,000 smallest companies in the Russell 3000^® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Pacific Crest Wealth Planning is located at 11209 Brockway Rd, Suite C-203, Truckee CA  96161 and can be reached at 530-563-5250.  John C. Manocchio, CFP®, CRPC® (CA Insurance Lic. #0H73423) is an Investment Adviser Representative with/and offers advisory services through Commonwealth Financial Network®, a Registered Investment Adviser.   

Authored by the Investment Research team at Commonwealth Financial Network.

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