Weekly Market Commentary August 12th to August 16th 2024

Inflation readings showed further signs of cooling, setting the stage for a Fed rate cut at their next meeting in September. The Consumer Price Index (CPI) was in line with estimates for the month, while the year-on-year readings were modestly less than projected and lower for a fourth consecutive month. Headline CPI came in at 2.9% and the Core reading (excluding food and energy) was 3.2%. The Core reading was at the lowest level since 2021 with the vast majority of the rise coming from increased shelter costs. Core goods prices declined for a fifth consecutive month, driven down by lower vehicle prices. Producer Prices (PPI) were equally sanguine at 2.2% headline and 2.4% for the Core, both below median forecasts.

Retail Sales were stronger than expected in July, higher by 1%, well ahead of the 0.4% consensus estimate. This is the highest monthly rate of change since January 2023. A 4% jump in car sales was a key driver after a 2% drop in June during a ransomware hack of auto dealers’ software. Despite the hype around Amazon Prime Day taking place in the month, non-store retailers contributed only 0.2% to the report.

Housing Starts plummeted by 6.8% in July with the prior month’s figures also revised lower. Starts have decreased by 16% over the past year. The report was the weakest since the throes of the pandemic in April 2020. The data was likely impacted by Hurricane Beryl, but certainly points to increased caution on the part of homebuilders. New Building Permits were also weak, down by 4% in July and 7% over the past year.

Equity markets advanced sharply on the favorable inflation and consumption reports. The S&P 500 closed the week higher by a stellar 3.9% to 5,554 to cap a seven-day streak of positive trading days after the short-lived sell-off the prior week. The technology-focused Nasdaq Composite closed the week markedly higher by 5.3%. The yield on the 10-Year U.S. Treasury closed the week modestly lower by 6 basis points to 3.88%.

Key economic reports next week include New and Existing Home Sales along with the minutes from the latest FOMC meeting. The Jackson Hole Economic Symposium will be held as well, which is always good for a handful of soundbites on monetary policy.