Market Update – July 22, 2019
The Week on Wall Street
Stock benchmarks retreated during the first week of the second-quarter earnings season. As some big names shared quarterly results, investors seemed more interested in what might happen at the Federal Reserve’s upcoming policy meeting.
For the week, the S&P 500 declined 1.23%. The Dow Jones Industrial Average lost 0.65%, and the Nasdaq Composite, 1.18%. International stocks, measured by the week-over-week performance of the MSCI EAFE index, were down 0.79%.[i],[ii]
Households Bought More Last Month
Retail sales were up 0.4% in June, according to the Department of Commerce. Consumer purchases account for more than two-thirds of America’s gross domestic product, and data like this may rebut some assertions that the economy is losing steam.[iii]
Traders still expect the Federal Reserve to make a rate cut at the end of this month, even with low unemployment, solid consumer spending, and stocks near record peaks. Ordinarily, the Fed lowers interest rates to try to stimulate business growth and investment when the economy lags. After ten years without a recession, its new challenge is to make appropriate moves to ward off such a slowdown.[iv]
Will Wall Street’s Expectations Be Met?
Thursday, Federal Reserve Bank of New York President John Williams noted that Fed policymakers could proactively adjust interest rates and take “preventative measures” to ward off a potential slowdown. A New York Fed spokesperson later said that Williams’ comments were “academic” and did not concern “potential policy actions.” Still, Fed Vice President Richard Clarida made similar comments last week, expressing the view that Fed officials “don’t have to wait until things get bad to have a dramatic series of rate cuts.”[v]
Two other Fed officials – Esther George and Eric Rosengren – have publicly stated that they are not in favor of a cut.[vi]
What’s Next
About 25% of S&P 500 companies report earnings this week. In addition, the federal government will present its first snapshot of the economy’s second-quarter performance.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: June existing home sales figures appear from the National Association of Realtors.
Wednesday: The Census Bureau presents its June report on new home buying.
Friday: The Bureau of Economic Analysis releases its initial estimate of Q2 economic growth.
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Past performance of investments is no indication of future results.
[i] https://www.wsj.com/market-data
[ii] https://quotes.wsj.com/index/XX/990300/historical-prices
[iii] https://www.cnbc.com/2019/07/17/the-feds-expected-rate-cut-not-supported-by-economic-data.html
[iv] https://www.cnbc.com/2019/07/17/the-feds-expected-rate-cut-not-supported-by-economic-data.html
[v] https://www.thestreet.com/markets/stocks-climb-rate-cut-hopes-microsoft-earnings-15025435
[vi] https://www.cnbc.com/2019/07/19/feds-rosengren-not-on-board-for-rate-cut-i-think-we-should-wait.html