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U.S. and International Equities
U.S. Markets Finish Mixed
This week’s consumer and producer inflation reports provided some support for the bull’s peak inflation narrative as the S&P 500 Index reached a four-week winning streak. The small cap Russell 2000 Index had the best showing as valuations for many of its components have been trading at over 20 year lows and as some market participants believe that earnings could recover faster than anticipated for small caps. Amid concerns over Europe and the continent’s economic status, the MSCI EAFE finished the week solidly higher as well.
Fixed Income Flattish
The Bloomberg Aggregate Bond Index finished the week little changed as bond investors continue to re-assess prospects for economic growth after this week’s better-than-expected inflation reports. High- yield corporate bonds, as tracked by the Bloomberg High Yield index, gained ground amid another solid week for equities.
Oil and natural gas prices rebounded this week amid energy supply challenges in Europe given the Eastern European conflict. Copper prices also had a strong week and reached a 5-week high amid a challenging year for industrial metals. Despite its rebound over the past month, Reuters reports that global copper speculators are anticipating a downturn in the industrial metal as the latest data shows more funds with bearish positions vs. bullish on the London Metal Exchange and COMEX.
Economic Weekly Roundup
July Consumer Price Index
July headline CPI was unchanged from June as gas prices declined, while shelter and food prices increased. The annual rate of inflation cooled to 8.5% from over 9% in June. Transportation costs declined over 2% from a month ago, which might be a sign of declining travel demand. Also, inflation is easing as durable goods prices continue their descent from recent highs. That being said, consumers are feeling the pressures from both rising shelter and food prices.
U.S. Wholesale Inventories
U.S. wholesale inventories increased less than economists’ expected in June and were revised lower after increasing solidly in May. The report shows that businesses slowed the replenishment of their stocks as they continue to draw down on excess inventories. Given inflation, softening consumer demand amid higher prices have appeared to play a role in inventory management.
Weekly Employment Report
Initial claims for unemployment insurance for the latest week came in higher than the prior week and missed economists’ expectations. Continuing claims increased from the prior week, but surpassed economists’ forecasts. Both initial unemployment claims and continuing claims have increased slightly in recent weeks.
The following economic data and potentially market-moving events are slated for the week ahead:
- Monday: NAHB Housing Market Index (Aug)
- Tuesday: Building Permits (Jul), Housing Starts (Jul), Capacity Utilization (Jul), Industrial and Manufacturing Production (Jul),
- Wednesday: Retail Sales (Jul), Business Inventories (Jun), FOMC Minutes
- Thursday: Weekly Initial and Continuing Unemployment Claims, Leading Indicators (Jul)
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