(Justin Vaughn, Editor, Options Trading Report)
Gross Domestic Product {GDP} pushed the economy at a faster clip in the second quarter, doubling the pace of the first quarter of 1.4% to 2.8% according to the Commerce Department. A good barometer and pulse of the trending economy. The GDP monitors all U.S. produced products and all services performed. Economists had predicted a rate of 2.1%. The economy shows great strength as the Labor Market continues to sizzle. Friday was a strong day for the indexes as the Dow Jones Industrial Average surged 654 points leading all indexes. The S&P 500 closed Friday with all sectors showing gains, and up 1.1%, and for the week lower by 0.8%. The Nasdaq Composite also lagged for the week losing 2.1%. The usually quiet Russell 2000 has kept chugging along, up Friday 1.5%, as the small cap value stock index has experienced a big infusion of capital this past month, as major profit taking in the tech and chip sectors continue to flood the index. Dec Mullarkey, managing director on investment strategy and asset allocation at SLC Management commented: “There is a broadening out of growth beyond big tech to other sectors that have been fairly beaten up,” he said. “Investors are hunting around for value.” Oil was weak, falling to $77.16, the third week of slumping from the $80 barrel range.
Monday’s market opened flat, struggling to gain traction all day. Traders and investors awaited the many expected second quarter earnings releases to start the week. After Friday’s soaring Dow Jones Industrial Average, up 650 points, Monday’s session was muted, finishing up 0.1 %, while the heavy tech Nasdaq Composite floundered, finishing even, as all eyes were focused on the 150 upcoming 2nd quarter earning releases, including several from the magnificent seven and a good number of tech, chip producers and market leaders (Amazon). The results of the (Federal Open Market Committee) meetings’ will hopefully give market watchers ‘hint’ of what is to be expected regarding the proposed September rate hike. Friday’s release of the Bureau of Labor Statistics will reveal the ‘Jobs Report’ addressing the direction and strength of the market and unemployment number, expected to be in the range of 4.1%. The recent sell off of techs, chipmakers and other market run-ups have given concern that the ‘high-flyers won’t be able to keep ‘earnings pace’ with stock prices distancing the earnings and projected earnings. As seen in the past month much pivoting and allotments of funds have taken place as investors seek to protect profits. “There’s just a lot going on, it’s hard to make a big call ahead of all of this,” said Keith Lerner, co-chief investment officer at Truist Advisors Services.
Wednesday was ‘tech day’ as the Nasdaq saw heavy-techs and popular chipmakers all jumping back in a confused market that marched higher. Mr. Powell indicated ‘again’ that the Federal Reserve Governors were in agreement that the September rate hike was right for the economy at this time. We have heard much rhetoric and seen little to substantiate their remarks. As the Israeli/Hamas War intensifies, with other local factions stepping up aggression, the entire region is a ‘powder keg’ ready to explode into full scale war.
Worries, fears, and concerns of the U. S.economy ruled the indexes on Thursday as a sell-off shattered the averages. The Nasdaq Composite fell 2.3%, dropping 405 points as the Dow Jones Industrial Average gave up 490 points, as all three indexes suffered severe one day losses. The 10-year Treasury yield dipped below 4% adding to the carnage of the day.
RUMBLINGS ON THE STREET
Richard Fairbank, CEO, Capital One Founder, during an earnings call Tuesday, WSJ “The U.S. consumer remains a source of strength in the overall economy.” Still the effects of high inflation and borrowing costs “are almost certainly stretching some consumers financially,” he said.
Jeremy Siegel, Author, ‘Stocks for the Long Run,” Barron’s “Although stocks are the most volatile asset class in the short run, they are the most stable asset class in the long run. No other asset class in the U.S. has achieved that over any longer time period.”
Christopher Waller, Federal Reserve Governor, WSJ “Right now the labor market is in a sweet spot. We need to keep the labor market in this sweet spot.”
A Justice Department Official, WSJ TikToK US, by its own admission, is merely a conduit for content-moderation decisions made by the Chinese entities.”