Markets enjoyed a strong week during the peak of earnings season and heavy batch of new economic data. The S&P 500 rose 4.26% despite data and earnings being mixed and the Federal Reserve raising interest rates by another 75 basis points.
Economic Data
New housing data and consumer confidence highlighted economic data early in the week as new home sales and pending home sales both came in far below estimates for June. New sales fell from 642,000 in May to 590,000 sales while pending sales dropped 8.6% from May while analysts had expected a much smaller decrease of 1.5%. Meanwhile, consumer confidence came in below the expected 96.4 with an actual reading of 95.7 for July, down from 98.4 the previous month.
Second-quarter gross domestic product (GDP) and the Personal Consumption Expenditures (PCE) report for June were the main focus at the end of week. GDP was expected to increase at an annual rate of 0.5% but instead fell 0.9%. The decline marked the second straight drop after the first quarter report showed GDP falling 1.6%. Two consecutive quarters of negative GDP growth historically marked a recession but the White House looks to argue otherwise.
The Fed’s preferred benchmark for inflation data, PCE prices, rose 1.0% while core prices (excluding food and energy) jumped 0.6%. The inflation update met analysts expectations for June and rose at a higher rate than in May when overall prices increased 0.6% and core prices rose 0.3%. The June PCE report also showed personal income and spending rose 0.6% and 1.1% respectively, both above the projected 0.5% and 0.8% rise.
Lastly, initial unemployment claims stayed mostly flat at 256,000 following the 261,000 reported the previous week which was upwardly revised from 251,000. Initial unemployment claims have been steadily trending upwards since hitting 166,000 in the middle of March.
Earnings
Many of the world’s largest companies reported earnings this week with Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), Meta Platforms (META), Alphabet (GOOG) and many others reporting quarterly results.
Meta managed to only fall around 5% after missing on estimates once again and reporting its first-ever decline in sales while also forecasting a second straight quarter of declining sales. The social media giant joined the club of struggling tech companies relying heavily on advertising revenue that have not performed as well coming off the pandemic and changes in privacy policies from the likes of Apple and Google.
Meanwhile, Apple and Amazon both saw their stock prices rise despite an earnings miss from Amazon and revenue miss from Apple. Rivian (RIVN) in particular continues to tank Amazon’s earnings results as Amazon lost $3.9 billion on its investment in the EV company.
Outside of big tech, energy giants Exxon (XOM), Chevron (CVX), And Phillips 66 (PSX) all surpassed estimates Friday while automotive giants General Motors (GM) and Ford (F) were mixed as GM missed on earnings but surpassed revenue expectations while Ford surpassed both estimates. The rival automotive manufacturers also reported positive updates on their EV production targets.
All in all, the S&P 500 rose 4.26%, the Dow Jones Industrial Average increased 2.97%, and the NASDAQ gained 4.70%.
