Weekend Update, August 19th, 2024: Fast Money

Index, Sector & Asset Performance

After quickly dropping -9.6% over the second half of July and early August, global equities rallied strongly last week with the S&P gaining almost +3.9%. This puts the cash S&P 500 up over +400 points off its lows just 10 trading days ago or +8% above its August 5th low to be more exact. The cash S&P 500 index now sits at 5555, about -2% below its all-time high set-in mid-July at 5669.

Market volatility calmed after recent economic data such as retail sales and initial jobless claims eased fears of a recession. Both PPI and CPI inflation data left the door open for the d to start a rate cutting cycle in September. Technology (up +7.5% on the week and 24% YTD) and consumer discretionary stocks (up +5.3% on the week but only +3.0% YTD) led the gains on the back of markets exhaling some anxiety over an economic slowdown.

The TOPIX Index, which is a widely recognized measure of global stock market performance, has rallied +20% off its recent lows and is now only down -4% from its month end July close. This is a composite index of 31 major stock market indexes from around the world, including the S&P 500 in the US, the FTSE 100 in the UK, and the Nikkei 225 in Japan.

After falling nearly -11% on a Monday a few weeks ago, Japanese markets led last week’s gains up +7.3%.

Economic Indicators and Earnings Commentary

The FOMC Minutes from the July 30-31 meeting will be released this Wednesday. Federal Reserve Chair Powell delivers his remarks at the Jackson Hole Summit on Friday at 10 am. The central bank is preparing to cut rates. Powell will likely hint at a September move.

On Thursday, housing market data will be released with existing home sales expected to climb +0.8% in July to an annualized 3.92 million units. That sales level would be -21% below the long-run average of 4.96 million from 2007-2023 according to BMO Research.

Over 90% of the S&P 500 has now reported their Q2 results. Also, per BMO Research, to date, 78% of companies have topped analyst expectations with an average surprise factor of just over 4% per Refinitiv data. Revenue beats have been fewer with less than 60% of firms having topped revenue expectations. Historically speaking, this is middle of the road data. While Home Depot has seen slowness saying that “higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly”, Walmart noted that “we don’t see any additional fraying of consumer health”. More data on 2nd quarter EPS from Goldman Sachs:

Operating earnings are set to rise near +12% y/y in Q2. This would be the first return to double-digit growth since profits surged off depressed levels out of the pandemic in 2021. This is while revenue growth has slowed, to a + 5% y/y clip. 3rd quarter GDP is tracking +2.4% quarter-over-quarter, annualized.

Global Market Trends/Commodities/Currencies

Gold hit another new all-time high of over $2500/oz and is up over 20% in 2024. Copper bounced on better US economic data and hopes of China stimulation.

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