Markets Reach New Highs as Earnings Season Picks Up
US: S&P 500 Index +1.7%, Dow +0.1%, Nasdaq +2.3%
Europe: STOXX Europe 600 +0.9%, German DAX +1.3% France CAC 40 +1.0%, U.K. FTSE 100 +0.5%
Asia: Japan Nikkei +0.9%, China Shanghai Composite +0.7%, Korea KOSPI -1.3%
Rates/Commodities: 10-Year Treasury yield +2 basis points to 2.07%, WTI crude oil +1.1%, COMEX gold: -0.7%
U.S. stocks rose during the week amid better-than-expected gross domestic product (GDP) data, progress in trade and budget talks, and hopes for looser monetary policy. The Nasdaq Composite Index led all benchmark indices with a 2.3% gain last week, while the S&P 500 Index added 1.7%.
S&P 500 stocks gained for the first three days of the week after Congress reached a deal to suspend the debt ceiling and the United States announced it will travel to China next week to resume trade talks. Speculation of a rate cut at the Fed’s meeting next week has also helped buoy stocks over the past month. Data released July 26 showed second quarter GDP grew 2.1%, higher than consensus estimates of 1.8%. Consumer activity added 2.9% to overall GDP, while trade and inventories were the biggest drags on growth.
“We’re encouraged by strength in consumer spending, especially in the face of global headwinds,” said LPL Research Chief Investment Strategist John Lynch. “Still, we believe capital expenditures will need to rebound as the cycle matures to extend the expansion. A U.S.-China trade deal would be an important first step.”
Overseas, global stocks were mixed. The MSCI EAFE Index of developed-market stocks was unchanged as investors digested a slew of disappointing Markit Purchasing Managers’ Index (PMI) data and markedly dovish language from the European Central Bank. Chinese stocks rallied for the first time in three weeks amid optimism for a U.S.-China trade deal.
Weekly Economic Calendar (July 28-August 3)
U.S. investors have a full economic slate to watch next week. The Fed’s July 31 policy announcement highlights the docket, especially because markets are positioning for policymakers’ first rate cut in 10 years. June core personal consumption expenditures (PCE) data is scheduled to be released on July 30, while July ISM Manufacturing PMI is slated for August 1 and the July jobs report is scheduled for August 2. Overseas, the Bank of Japan and the Bank of England will both hold policy meetings, and investors will get their first glance at Eurozone second quarter GDP data.
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