Markets rise on mixed earnings and a week full of economic data


Markets benefited from a good week at the height of earnings season and a large batch of new economic data. The S&P 500 rose 4.26% despite mixed data and earnings and the Federal Reserve raising interest rates another 75 basis points.

Economic data

New housing and consumer confidence data highlighted economic data from earlier in the week, with new home sales and pending home sales both well below June estimates. New sales fell from 642,000 in May to 590,000 sales while pending sales fell 8.6% from May when analysts had expected a much smaller decline of 1.5%. Meanwhile, consumer confidence fell below the expected 96.4 with an actual reading of 95.7 for July, down from 98.4 the previous month.

The second quarter Gross Domestic Product (GDP) and the June Personal Consumption Expenditure (PCE) report were the main focus over the weekend. GDP was expected to grow at an annual rate of 0.5%, but instead fell 0.9%. The decline marked the second consecutive decline after the first quarter report showed GDP falling 1.6%. Historically, two consecutive quarters of negative GDP growth have marked a recession, but the The White House seeks 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 faster pace than in May, when headline prices rose 0.6% and core prices 0.3% . The June PCE report also showed that personal income and spending rose 0.6% and 1.1% respectively, both higher than expected increases of 0.5% and 0.8%.

Finally, initial jobless claims remained mostly flat at 256,000 after the 261,000 reported the previous week, which was revised up from 251,000. Initial jobless claims have been steadily increasing since reached 166,000 by mid-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 only managed to fall about 5% after again missing estimates and reporting its first-ever sales decline while also forecasting a second straight quarter of sales declines. The social media giant has joined the club of struggling tech companies that rely heavily on ad revenue that hasn’t done as well post-pandemic and changes in Apple and Google’s privacy policies.

Meanwhile, Apple and Amazon both saw their stock prices rise despite a shortfall from Amazon and a shortfall from Apple. Rivian (RIVN) in particular continues to drag down Amazon’s 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 beat estimates on Friday while auto giants General Motors (GM) and Ford (F ) were mixed as GM missed earnings but beat revenue expectations while Ford beat both estimates. Rival automakers have also reported positive updates on their electric vehicle production targets.

In total, the S&P 500 rose 4.26%, the Dow Jones Industrial Average rose 2.97% and the NASDAQ gained 4.70%.

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